Mortgage renewal

[ionelv]

We recently early renewed our mortgage (2.99% fixed for 5 years effective late March instead of a PRIME-1.35% VAR effective early May, due to creeping rates).  I am curious how far will the rates change over the next 5 years and whether  the VAR would have been better or worse than the fixed rate over the five year period.

Comments

[ionelv.livejournal.com]

Less than 2 months later, rates have gone up by 1%:


Best ratehub.ca rates: 3.49% for 5-yr fixed, same for 1-yr fixed as above and 1.9% for 5-yr variable (which is better than the above 2.55%=3.2% prime — 0.65%).

So, if I would have waited until now and locked in the var, I would have started at 1.85% (3.2% prime — 1.35%) and I would have saved some money (both from the differential in early renewal for past 1.5 months of 0.9% and from future savings of 1.14% starting now until prime rates go up again). The math shows VAR savings of $925 by now. We will see if that holds.

[ionelv]

Sometime around Remembrance Day (Nov 11), the fixed rate (2.99%) will end up saving us money because the variable rate is higher since mid-July (was 3.14% then and is 4.6% now). So, the fixed rate cost us about $1200 in higher interest payments up until the variable rate got higher and in the four months since the fixed rate will end up saving us about $1200 by mid Nov. If the rates come down again before the renewal, the variable rate might save us money in the long run anyway. We'll see.

[ionelv]

By next rate reset (early April), we will have total savings of over $15k (due to choosing FRM over VRM).

[ionelv]

By next rate reset (early Dec), we will have saved over $22k total so far (only 2.75 years into our mortgage).