2.99% for a 5 Year Fixed Mortgage? The Catch Explained!
Lowest 5 year Fixed Rate Mortgages in Canada Ever!
The Finance Minister and the heads of the Big Canadian Banks have recently been alluding to the fact that the property market in Canada, particularly in the real estate markets in Vancouver and Toronto may be getting a bit too hot for their liking based on the very low interest rates we are seeing in Canada right now.
And then came this…
2.99% on a 5 Year Fixed Mortgage? Whats the Catch?
This is the lowest 5 Year Fixed Rate Mortgages have EVER been!
I recently interviewed Vancouver mortgage broker, Chad Watts about the ultra low mortgage rates that the big banks are offering, primarily the 2.99% 5 Year Fixed Rate Mortgage.
When I heard about these mortgages, I thought:
A) “Whats the Catch?” and,
B) “How can the Banks afford to offer money this cheap?” and apparently others shared my thoughts on that question.
Today we are talking about the “Catch” with these 2.99% 5 Year Fixed Mortgages, and here’s what it is:
- Amortization: No amortizations longer than 25 years. Investors looking for the longer 30 to 40 year amortizations that are still allowed with non-insured low ratio mortgages will need to look elsewhere as will those who like the lower payment that a longer amortization offers.
- Prepayments: Borrowers can only pay down 10% per year with this mortgage rather than the standard 20% per year.
- Closed Mortgage: You can only get rid of this mortgage if you sell the property within the fixed 5 year term.
- Renewal: You can only renew into a very limited range of mortgages offered by the bank if you choose to renew. Very often these options may not be all that good.
- Not Portable: If you want to sell the property the mortgage is on, you will not be able to port the mortgage over to another property
- Non-Assumable: You can’t sell the mortgage with the property.
The basic catch is that these mortgages may be great for specific property owners, but their lack of flexibility may not work for many home owners who may have changing housing and investment needs over the next 5 years (which is a long time).
If its Too Good to be True, It is!
Very often it is possible to get mortgages at a slightly higher rate that will allow far more flexibility and can SAVE a borrower a lot of money should they need to make changes to the mortgage in the future.
Looking for Advice on Buying a Property? Check out these great videos for New Home Buyers in Vancouver!
Thinking of Selling and Don’t Know Where to Start? Have a look at the Informative Videos on How to Sell a Property in Vancouver!