All of the warning signs are there: interest rates are going to be on the rise in 2017. The good news is, that if you already have a mortgage with a fixed interest rate, you will remain locked into that rate until your mortgage comes up for renewal.
However, new buyers are going to be subject to the interest rate increases – essentially, owning your home is only going to get more expensive in 2017.
Mortgage calculators, like ours, can help you figure out how these rising rates will affect your monthly financial cash flow and outlook.
The following are some examples of how anticipated interest rate increases will affect the mortgage payment on a $360,000 home, with 20 per cent down and a 25-year amortization period:
A current available 5 Year Fixed Rate Mortgage that could go from 2.64 % to 2.94 %: $1,310 to $1,354 — $44 more per month.
A current available Variable Rate Mortgage that could increase from 2.7% to 2.85% : $1,319 to $1,341 – $22 more per month.
A $700,000 mortgage, with the same changes in rates would increase the monthly payment by $85 and $42, respectively.
For a $1 million mortgage, the same changes in rates would increase the monthly payment by $121 and $88, respectively.
What does this all mean to you? This increase in interest rates, affects your monthly budget and housing affordability. In recent years, we have enjoyed historically low interest rates and Canada’s hot housing markets have soared to levels out of reach for many. These interest rates are seen to be a way to further correct the Canadian housing market.
What can you do to avoid paying additional interest on your mortgage, if you are planning to renew, refinance or purchase a new home now or in 2017? Pre-approval is the answer. Did you know that if you complete a mortgage application today, that the rate and program that you apply for is good for 120 Days? That 3 months can save you over $1000 in interest that you would pay during the year if you wait until interest rates increase to be approved.
On a 5 Year Term, you would be saving $5000.00, based on the above examples.
The math is simple, and the process of pre-approval is even simpler. If you anticipate the need to renew, refinance your mortgage or purchase a new home, why not be pre-approved at today’s lower rate?