Your Mortgage Resource - Variable or Fixed?

Welcome to My Mortgage Broker

Greetings!

As an independent mortgage professional I help my clients to establish a plan of action to help achieve their financial and life goals.

In this issue - update on rates, the economy, mortgage protection insurance and mortgage strategy.

Next month - legal issues after separation, etc

If you are in the market to buy or refinance and need a rate hold - through till the end of the year - give me a call.

Feel free to email or call me with any questions and PLEASE PASS ON THIS INFORMATION to anyone you know that could benefit - sharing is a good thing.

If you find this content informative and wish to share it - simply click the button above and forward to your family, friends or colleagues. If they enjoy it they are welcome to sign up for future issues. Thank you.

Fixed or Variable?

Has the choice become easier.

John Bordignon - Paradigm Quest Inc.

We maybe in or coming to an interest rate environment when taking a fixed rate or a hybrid mortgage (50/50) may actually be cheaper than staying in a variable rate. Why you ask.....let's look at the facts as to why this maybe a good time to take a fixed rate or hybrid mortgage.

1. 5 year fixed rates are at the lowest levels in history, we have never been this low.....3.39% and 3.49% 5 year fixed rates are available through many lenders.

2. The gap between a prime - .50% (2.50%) and 5 year fixed rate (3.49%) is 0.99% and (in some cases even lower ), this is down significantly from 3 to 4 months ago when the gap between a 5 year ARM and 5 year fixed rate was as high as 2.00%

3. We have just seen major Bank's increase ARM rates by 20 bps as liquidity costs and funding costs are starting to take their toll and forcing the increase in ARM rates, thus making the ARM to Fixed rate spread or gap even narrower and will this trend continue

4. You can't predict when to time a conversion from ARM to Fixed rate, especially in a volatile market. Fixed rates have a tendency to move ahead of variable rates....when variable rates begin to rise the fixed rate has already gone up and if you convert you maybe converting at a much higher fixed rate than today's rates.

To view the complete article visit my blog at www.MyBcMortgage.ca

Strategies for your mortgage for the next term

Fixed, variable, both

Here is a portion of the above article from John at Paradigm that I thought may be a helpful reference when making a decision on your next mortgage term.

If we continue to see the gap between fixed rate and ARM (variable) rates shrink then the risks of taking a variable rate versus fixed rate increases substantially. The risk being that ARM rates could increase higher than 1 % over the next 18 months to 24 months, therefore over the course of a 5 year term the fixed rate maybe less costly than the ARM rate. Once the gap between ARM and fixed gets to 1% or less, I believe the smart money would go to fixed rate versus ARM. If the gap between ARM rate and fixed rate is between 1% and 1.50% then a 50/50 mortgage maybe the best bet. If the gap between ARM and fixed rate is in the 1.50% to 2.00% range then ARM rate maybe the way to go. Based on the present volatile market conditions it is hard to predict or say what will happen, this volatility, is the biggest wild card and probably the main reason I personally would be taking a fixed rate or 50/50 versus an ARM, a bird in the hand (fixed rate) is better than two in the bush (ARM rate).

Fixed Rate to ARM Gap *	Primary Product Selection
less than 1.00%	5 year fixed rate
1.00% to 1.50%	50/50
1.51% or higher	5 Year ARM
* difference in rate between a 5 year fixed rate and 5 year ARM rate

Mortgage Protection Insurance

Does your mortgage protection insurance really protect you or the lender?

Courtesy of Margaret Reynolds -Desjardin Financial

Cell: 778-986-9186 or email: margaret.reynolds@dfsin.ca

Your home is the biggest purchase you will make. As you are the one making the payments you need to be sure you protect you and your family, not your lender when it comes to insurance.
The coverage you get from a lender is very different than what you get directly from an insurance company. Here are some key differences to keep in mind.

Lender mortgage insurance offered by lending institutions	Personal life insurance from any of Canada's top insurers
Not underwritten until time of claim, high rate of denied claims	Is underwritten at time of application, claims not denied
Lender insurance covers only the amount of your mortgage	You choose the amount of insurance to buy and what type of coverage
if you re-finance with another lending institution, you will have to buy a new insurance policy	Insurance isn't tied to your mortgage, not affected if you re-finance with different lender
Lender is beneficiary	You choose your beneficiary
Your lender pays off the mortgage when you die with no funds leftover for your heirs	Your beneficiaries choose how to use the funds
Your premiums remain level but the benefit amount reduces with each mortgage payment	Your premiums remain level and the benefit amount remains level unless you choose to change it

According to statistics Canada, over 40% of mortgage foreclosures are caused by illness and injury. Talk to an insurance professional to find the right solution to protect your family so if something happens you have the certainty of knowing you won't lose your home.

Note from Pauline - By law, I have to offer mortgage protection insurance to my clients. However, I always suggest you consult with a professional insurance broker to ensure you have what you need. I don't ever recommend you take what is offered by the lenders as they are in the business of mortgage financing and not insurance. I think it is a conflict and the insurance should be handled independently from the mortgage.

Pauline's Picks
www.bloomberg.com

Helps to keep an eye on what is going on in the world without watching the news on TV.

Volume 4

Issue:: 9

Sept 2011

Bank of Canada
BOC meets and no change to overnight lending rate. Banks maintain Prime - at 3.00%.

Bond Yields - Fixed rates may rise.

5-year fixed rates are effected in part by the bond yield. This happens because of the gap between the bond yield and fixed rates.

Canadian 5 yr bond yields markets -.10bps to 1.47. Fixed rates at 3.59% below

in the comfort zone.

Best fixed rates (below 3.4%) available. Call Pauline for details.

My Money Coach

Check out this excellent resource for money saving and budget tips.
www.
mybcmortgage.ca/
learning-centre/resources

Fixed or variable? How about both....

Worth repeating from the August newsletter

I recently helped clients decide between fixed or variable on their mortgage.

The husband wanted to go fixed and the wife wanted to go variable. Sound familiar.....

Today there are so many options and they didn't realize they could do both. We split the rates so they could have a low fixed rate of 3.69% (the rate at the time) and the portion in variable at 2.20% (rate at the time). This helped them lower their overall monthly costs with the variable rate while keeping the peace of mind with a fixed portion.

They were both very happy - and now they agree on the mortgage. I can't help with the new paint color for the house :)

Pauline Tonkin
The Mortgage Centre - Elder Mortgage
101 - 566 Lougheed Hwy, Coquitlam BC
Phone: 604-813-8402