2 Ocotber 2012

(Source:  D+H Filogix Express Calculator – Mortgage Analyzer)

3 Year Fixed vs. 5 Year Fixed Term Payment Comparison

Term	Monthly Payment	Principal Pay Down	Interest Paid	Total Payments
3 Year Fixed @ 2.69%	$ 1,143.71	$ 21,955.47	$ 19,218.09	$ 41,173.56
5 Year Fixed @ 2.94%	$ 1,175.43	$ 21,293.13	$ 21,022.35	$ 42,315.48
Difference after 3 years of payments	$ 31.72 LESS for 3yrs!	$ 662.34 MORE for 3yrs!	$ 1,804.26 LESS for 3 yrs!	$ 1,141.92 LESS for 3yrs!

So, based on the above table by choosing 3yrs fixed at 2.69% over 5yrs at 2.94% in 3 years you will be better off by $1,804.26. Nice, but what happened after 3 years are gone and what will be interest at the time you need to renew your mortgage?

Our general advice is like that, choose 3 years fixed mortgage at 2.69% today if:

1. Your closing date is more than 30 days from the date of mortgage application. Rate hold on our 3 years fixed promo is up to 120days.
2. You can be qualified on a higher interest, since all mortgages shorter than 5yrs are qualified on a special MQR rate set by Bank of Canada (5.24% as of today);
3. You might require refinancing or planning to sell your property sometimes in the nearest future.

According to statistics more than 70% of 5yrs fixed mortgages are getting paid after year 3 with penalty due to the major life event events such as renovations, sending children to school or moving to a larger home;

1. You are planning to take advantage of extremely low interest rate and increase your regular payment or make prepayments to pay mortgage faster. 2.69% offer allows you to prepay up to 20% of the original principal balance and increase your regular payments by up to 20%. All extra money goes directly toward reducing principal balance!
2. You are strong believer in variable rate mortgage and hope that in 3years you can switch into variable with greater than today discounts.

On the other hand you might consider 5years fixed at 2.94% if:

1. You have a quick closing date (within 30 days) or doing refinance (typically funded within 30 days period)
2. You need the lowest 5 years rate on the market to stretch your salary and be able to qualify for a bigger mortgage amount. For 5 years fixed rate mortgages banks and insurance companies use contract rate for qualification (2.94% in case of our promo)
3. You plan to stick to your current home for the next 5 years and don’t think that you might need to refinance earlier than 5 years from now.
4. You want to enjoy piece of mind for the next 5 years and be protected from any rate increase or market fluctuations.
5. You believe that we are currently entering into a period of gradual rate increases and consider 2.94% the lowest and greatest offer for 5years fixed mortgage.

As you can see each of our great offers 2.69% for 3 years fixed rate mortgage or 2.94% for 5 years are looking very appealing and truly unbelievably attractive. If you still have doubts which one is best fit for you – consult with your mortgage broker or call us to arrange free consultation.