I remember my morgage broker telling me that interest rates are only allowed to raise by 3 points per year or something... look that up because if thats the case and you do have a bit of wiggle room... i'd wait it out untill they start rising and then lock in to maximize your years...

Quoted from BIGWIG416

I remember my morgage broker telling me that interest rates are only allowed to raise by 3 points per year or something... look that up because if thats the case and you do have a bit of wiggle room... i'd wait it out untill they start rising and then lock in to maximize your years...

That is totally not the case .. there is no such restriction

oh...  i really remember her not telling me to worry because there was some restriction... maybe i was misinformed... shrugs

Quoted from BIGWIG416

oh...  i really remember her not telling me to worry because there was some restriction... maybe i was misinformed... shrugs

Didn't mean to be harsh ... it's just interest rates are set by the BOC and mortage rates more or less are based off of those rates (indirectly with +/- put in for current economic situation .. bank losses stuff like that) but it is a market and the govt doesn't cap it (your bank can .. they can say it shouldn't go up more than 3% or as someone previously mentioned they can offer you a cap on your mortgage (which they would hedge in the market) but there is nothing stopping rates jumping 5-10% in a year ...it is very unlikely but there is no rule that would stop it.

Thats crazy.. and scary... maybe I will hold off on buying a house for a year or two just to see what actually happens

As others have mentioned, it's a question of risk tolerance and what you can safely afford.

If it were me, I would stay variable until the fixed rate costs get to the point that I can comfortably afford.  Remember, you can always go 6 month variable and defer the decision until then.  In other words, if I can only afford $1200 a month, I would take the short term variable rate until the fixed rate reaches $1200, then lock in.

If you have $175K (20yr), with your current rate, you'll pay $898/mth, $19K in interest and your balance will be $140K after 5 years (nice, but not realistic with the rates).  At the 3.99%, you'll pay $1060/mth , $33,600 in interest and your balance will be $145K.

But what if you stay at 2.15% for a year, then it jumps to 4.5% for the next 4 years?  In that case, you'll have paid $33K in interest and your balance will be $146K.  Pretty much the same as if you've locked in for 3.99% now.  The difference is your payments will be $1110 for the last 4 years.  Can you afford it?

The lower you stay now the bigger the rate hike you can stand down the road.

Quoted from Ricker

When I studied finance, my prof offeered me this example;
He asked how much I pay for milk. I said $4 for 4 litres. He asked me if I would be willing to lock in my price of $6 for the next 5 years and "protect myself against the mortgage rate increases""
It is silly of course to pay a premium for peace of mind.
Go variable if you have the stomach for it.

Unfourtunately this statement is false and truely depends on what you are buying. Many of you have locked in your natural gas prices at higher rates than the price today. Hedging fuel prices makes companies billions of dollars, even wheat, corn, pork bellies are bought and sold at higher prices. You are not buying peace of mind. You are buying insurance against the future economic situation. Is is stupid to buy house insurance? Mortgage insurance? The answer is always no. Should you always buy these things? No. There is a time and a place. Quite frankly if I was not planning on paying off my house within the next 10 years I would be long and locked in. Rates today are insanely low and we are in for massive rate hikes. Bernanke is going to change his wording soon and take out "for an extended period" (If this makes no sense to you, he is the Fed Chairman and he is going to start raising rates, the question is when) A 1 % raise at the fed level could be a 2-3% raise in mortage rates. Do not underestimate how fast these things can happen. When you deal with Money supplies and rate changes things can go fast. Just look at 1 year ago the US Dollar was worth 22% more than the Canadian Dollar. Yes this matters, it shows how fast things change in a world wide economy.

You want to be scared; if I am right and there is a bubble in the Canadian Real Estate Market our Government has very few tools to help support this. The reason is that the strongest tool is interest rates and we will have no ability to lower those. This is because the money supply has been inflated by defecits and in an environment of rapidly decreasing real estate and the associated down turn in the Canadian economy there will be no way to lower interest rates as the US and world will be raising rates. If we did lower rates in Canada inflation would sky rocket and you would have stagflaltion. Yes it could get very ugly in Canada. Some of you will think I am way off and that is fine as we are all allowed to have an opinion. However keep this in mind, locking in your costs and knowing your future outgoing expenses may be very wise; or it may not be. It truely depends on your economic outlook and your opinion on not only mortgage rates but the overall economy and the economic situation in the world. I beleive everything above will happen with the exception of Canada lowing interest rates, I also believe that India, China and Russia will be expanding at this time driving up oil and mineral prices. (Good for this sector in Canada, but very bad if we have stong inflation, rising interest rates and a falling housing market.)

If you have less than 10% equity in your home and you are looking at 25+ amortization in a mortgage and you are just able to pay the mortage, be VERY VERY Careful in your decisions.

Quoted from Ricker

When I studied finance, my prof offeered me this example;
He asked how much I pay for milk. I said $4 for 4 litres. He asked me if I would be willing to lock in my price of $6 for the next 5 years and "protect myself against the mortgage rate increases""
It is silly of course to pay a premium for peace of mind.
Go variable if you have the stomach for it.

Then I am silly

Well, to be honest, my mortgage is about 60% of my house value, so I am ok. Payments are not murder either. But considering the average over the last 30 years has been around 9%, I figure locking in at 5-6 for the rest of my term is a wise decision. I don't trust the economy to make such a critical decision... it is too unstable.

Quoted from Sparky

Well, to be honest, my mortgage is about 60% of my house value, so I am ok. Payments are not murder either. But considering the average over the last 30 years has been around 9%, I figure locking in at 5-6 for the rest of my term is a wise decision. I don't trust the economy to make such a critical decision... it is too unstable.

Words of wisdom! Now finish my cabinet

Quoted from Jester

Words of wisdom! Now finish my cabinet

Shut up or I will raise your interest rate!

I've lost total interest in this thread !