Here is a question from one of my readers.
"Tibor, what would you advise someone buying a first home today about mortgages – lock in for five or 10 years, or go variable?" Most people are going fixed, though a lot are also using combination mortgages, according to info from RBC.
Although I knew the answer I consulted with one of my lenders and here is what he had to say...
A ten year mortgage has very reasonable prepayment penalties ONCE you get into the sixth year and beyond – then it’s just three months’ interest.
But IRD (Interest Rate differential) in years one to five of a ten year mortgage is serious Money – so as much as the rate protection is attractive, it is unlikely the ten year mortgage will fit a first time home buyers needs over such a long period of time. The ten year mortgage is a better fit for a clients who know that they won’t be moving anywhere in some time, like me. I have been in my house for 10 years and I don’t see myself living anywhere else.
(a) Fixed or Variable – no discussion necessary – go fixed.
(b) What term? - Yes five years is often the term of choice, but it
may not be the best if you are pretty sure you will move in three
years. You can do 2.99% for three years and 3.19% on very clean
applications for five years.
Feel free to comment or contact me with any questions/inquiries.
Kind Regards,
Tibor Bogdan
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Abbotsford Market Watch
 What is a pre-sale? Example scenario: When the developer intends to build an apartment building and applies for financing, the bank will grant financing under certain conditions. One of them will likely be a certain percentage of pre-sales the developer will need to secure before receiving the funds.
It is common practice for a developer to approach several real estate investors and offer them an opportunity to purchase units of the non-existent building at a discounted price, and on good terms. Once the number of pre-sales is accomplished, the developer goes ahead with the construction, which will likely take two years or longer to complete. During construction, their marketing team offers the remainder of the units for sale at market value to the public. If you are a RE investor, you know that it is preferable to be buying at the pre-sale prices, not market value prices. The question is, how do you get the invitation to buy a pre-sale? In the past many years, investors have made substantial income by buying at wholesale prices and selling at retail prices even before they needed to complete their purchase. I saw many of them lining up and sometimes even camping overnight in front of the sales center to get a chance to buy at lower prices, but not everyone was lucky enough. You needed to be well-connected to get an opportunity, and you had to act fast. Today is a bit of a different story. Several projects in the Lower Mainland and Fraser Valley offer really good prices and incentives to secure a unit now and complete the purchase two or three years later. The list of incentives varies from one project to the next. Besides attractive prices, you can get low deposit amounts (5-15%), low or no assignment fees, free updates, a mortgage rate buy-down program, extra parking and more. A month ago, I helped a few of my clients purchase a presale in Surrey that sold out in 2 days, and I know of another good developer that will be offering a few units for sale as well. If you would like to know more about these opportunities, I would encourage you to call or email me, and I’ll be happy to send you details on those projects. Kind regards,
Tibor Bogdan
Century 21 Creekside Realty Ltd. 45428 Luckakuck Way #190, Chilliwack, BC V2R 3S9 cell: 604-855-2521 |
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