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Medicine Hat Two Year Fixed
An FAQ for Medicine Hat Mortgage Customers
We’ve created a list of the most frequently asked questions from our Medicine Hat mortgage customers along with the answers from the Whalen Mortgages Medicine Hat team.
Why should I compare Medicine Hat mortgage rates?
Frankly, you can’t afford not to compare mortgage rates. Every fraction of a percent in the interest rate on a home loan equals thousands of dollars spent on interest over the life of the loan.
Know that mortgage shopping doesn’t have to be difficult. You can work with a Medicine Hat mortgage broker to compare interest rates as well as loan terms. And know that you shouldn’t just shop for a lower interest rate on your mortgage when you’re home shopping. For example, you should do the same research as your mortgage comes up for renewal. While the majority of Medicine Hat home owners simply renew their mortgage with their current lender at whatever terms they’re offered, you can negotiate a lower interest rate or more favorable terms. And you can switch mortgage lenders during that time frame without any penalty. That’s the whole point of mortgage renewals in the first place!
What is the difference between fixed rate and variable rate mortgages?
First, fixed rate mortgages are much more common. Around two thirds of Medicine Hat mortgage customers have a fixed rate loan. A fixed rate loan offers security and stability in the form of a set house payment. If interest rates go up, it doesn’t matter, because your mortgage payments are unchanged. However, lenders are taking the risk that they’ll lose money if interest rates rise. They make up for it by charging a higher interest rate on fixed rate loans than variable rate loans.
Variable rate loans are closely tied to the interest rate the Bank of Canada charges banks. The bank charges a higher rate to cover their operating costs, their profit margins and the risk associated with a given loan. That’s why you’ll pay a higher interest rate if you’re considered a high risk borrower or the property itself is non-conforming. (Think anything other than an urban condo or suburban single family home.) The lender won’t lose money if interest rates rise, because your house payment will increase along with interest rates. That’s why variable rate home loans in Medicine Hat have a lower interest rate than fixed rate home loans.
Lenders understand that you may want to switch to a predictable fixed rate mortgage. You’ll typically pay a three month interest penalty if you refinance to a fixed rate loan. That locks in the interest rates at the time you refinance. You can also choose a shorter loan term, so that you have the flexibility to shop around for a better interest rate without having to pay a penalty to refinance your mortgage. This is why a one or two year fixed rate mortgage is a good compromise between a five year fixed and a five year variable rate mortgage. That’s especially true if you think Canadian mortgage rates are going to fall in the interim. If you have a fixed rate mortgage on your Medicine Hat home, the lender will simply see a higher profit margin on your home loan as interest rates fall.
Should I get an open or closed mortgage?
The answer to this depends on whether or not you’re really going to pay down the loan ahead of schedule. A closed mortgage limits how much money you can pay toward the loan balance as well as when. It may even prohibit it altogether unless you pay a prepayment penalty. An open mortgage doesn’t have this prepayment penalty. On the other hand, you’ll pay a higher interest rate whether or not you make those extra house payments.
Know that there are a variety of ways you could pay off the loan faster. For example, you might want to pay biweekly instead of twice a month. Or choose a shorter mortgage term. While a 15 year mortgage comes with a higher monthly payment than a 25 year mortgage, you’re forced to pay down the loan balance faster, too.
What is a rate hold?
Imagine that you walk into a mortgage lender in Medicine Hat and ask them how much you’d pay in interest on a home loan. They give you a de facto price quote of 3%. That number is based on today’s interest rate. The rate hold is how long they promise to issue a mortgage at that given interest rate. After that point, they’ll still extend a mortgage to you but at that day’s interest rate. Lenders typically have a rate hold of 30 to 120 days. Consult with a Medicine Hat mortgage broker to find lenders with the lowest interest rate and longest rate holds.
Call your dedicated experienced Medicine Hat Mortgage Brokers today to get the lowest mortgage rate.