If you haven’t already heard, the Bank of Canada has raised its key lending rate by 0.50%.
Watch this short video on what it means for you and your mortgage:
How does this affect my current mortgage?
In other words …
If you have a variable rate mortgage or variable home equity lines of credit (HELOC’s),
either your monthly payment will increase or more of the payment will be allocated to
the interest, instead of the principal. Your lender will communicate any increase
and the effective payment date.
Fixed-rate mortgages are not tied to prime rate and aren’t affected.
Variable Rate Mortgages
It’s natural to be tempted to lock in an as soon as you see rates starting to climb
but you’ll still save money by staying variable.
In other words, it will take several more rate hikes to narrow the gap between variable-rate
mortgages and their fixed-rate counterparts. Beware! Fixed-rate mortgages also come with a
much larger penalty to break your mortgage. If you’re still feeling uneasy,
let’s have a conversation about your specific options.
Fixed rates are also rising, though not in response to this particular increase.
However, if your mortgage is coming up for renewal in the next 6 months, let’s look
into renewing as early as possible.
Lines of Credit (HELOC)
If you owe a considerable amount to your HELOC, it may be a good time to consider
converting that HELOC into a mortgage. Meaning, one that starts to pay itsself off.
“Hey Tori, I am thinking about purchasing in the coming months. What should I do?”
Get pre-approved ASAP! A pre-approval is a smart move anytime you’re
considering a purchase, but especially in a rising rate environment. A preapproval will
lock in your rate for up to 120 days so you’re protected from rate increases while you shop around.
If you have any questions or would like to discuss your specific details, please book a call with me.
Let’s Hop On A Call