Variable rate just went up

RichmondCA wrote: ↑ BMO, TD, & RBC’s variable mortgages do not increase the monthly payment if the prime rate goes up unless you hit your “Trigger Point Amount”. In other words, depending on the bank and Trigger Point Amount criteria, unless interest rates have increased to the point where your payment is no longer covering the interest + deferred interest your payment will stay the same even if we see moderate rate hikes.

On the other hand, CIBC, Scotiabank, National Bank, and monoline lenders (mortgage only lenders – not banks) all increase your payment as prime increases.

zalapauser wrote: ↑ I'm with CIBC. my rate is not increasing. I will pay more interest but the payment is staying the same.

RichmondCA wrote: ↑ That's odd, I confirmed this with a broker I work with, maybe there is some nuance between the mortgages.

RichmondCA wrote: ↑ BMO, TD, & RBC’s variable mortgages do not increase the monthly payment if the prime rate goes up unless you hit your “Trigger Point Amount”. In other words, depending on the bank and Trigger Point Amount criteria, unless interest rates have increased to the point where your payment is no longer covering the interest + deferred interest your payment will stay the same even if we see moderate rate hikes.

On the other hand, CIBC, Scotiabank, National Bank, and monoline lenders (mortgage only lenders – not banks) all increase your payment as prime increases.

canoek wrote: ↑ CIBC has this product where they don't change the total amount, but as rates increases the principal gets lower and the interest goes up. It all goes tits up when you have to renew and you find yourself paying a lot more. It happened to a friend of mine through which I found this out. It is the dumbest product out there preying on the dumbest people. It is for people who want a fixed mortgage payment, but at the interest of the variable rate on the day they get their mortgage.

NickL645 wrote: ↑ I disagree with this statement.

The idea really is for investors who want a fixed mortgage payment which makes it much easier to calculate their monthly costs. Interest is a write off anyways, so a non-issue.

At the same time, the variable mortgage makes the IRD minimal when it comes time to sell. So it's a good position/product for investors.

My $0.05

abhay15 wrote: ↑ I agree with both sides about the variable mortgage statements, except maybe the part about 'dumbest product for dumbest people'. More like mis-informed usually through their own "fault". Fault in quotes because it could be communication / language issues or just not very financially savvy. Most people under 40 don't have an excuse though--there are enough bilingual bankers and brokers speaking your language to be able to ask questions and explain things to you.

CIBC, and other banks who keep the payment the same on variable mortgages, have a buffer when they set these payments so that you are actually paying more than required based on the variable rate at the time. In a stable or decreasing interest rate environment, a 3 or 5 year variable rate in this case will actually shave off more than just 3 or 5 years of the remaining mortgage. So it goes both ways. I would actually argue that fixed payments is actually better for financially unsavvy folks because seeing increasing payments with changes in the variable rate where they see more cash leaving the bank every month will be a bigger emotional hit than the mortgage balance upon maturity of the mortgage.

skeet50 wrote: ↑ Mis-informed, unsavvy, ignorant, unaware...you can use whichever term you want, it still primarily comes from folks buying mortgages based on rate first as if rate is the only factor that determines the overall cost of a mortgage.

skeet50 wrote: ↑ I'm afraid lots of homeowners are about to find out just how expensive it really is to choose that lower rate variable rate mortgage. Most won't find out until the end of their term when they go to renew though.

bg8055 wrote: ↑ Im on a variable rate.

The 25 point increase caused my total amortization to increase but the payment is the same.

I am thinking about making a lump sum to bring back the amortization as scheduled. Thoughts?

bg8055 wrote: ↑ Im on a variable rate.

The 25 point increase caused my total amortization to increase but the payment is the same.

I am thinking about making a lump sum to bring back the amortization as scheduled. Thoughts?