In both conventional and private mortgage markets, fixed rate jumbo mortgages are back – but what does this mean for you? Last year you would have been hard pressed to find anything over $400,000 at a fixed rate; the Bank of Canada’s insurance arm defines a jumbo loan as anything above $450,000. But with home sales flagging and home prices rising, you’ll find it’s a lot easier to find a jumbo loan at a fixed rate under $1m these days. Here we’re going to talk about why fixed rate loans can be better and how you can find the one that’s right for you.
What is a Jumbo Mortgage?
Jumbo mortgages are large loans meant to help people buy large homes – but with home prices rising across Canada they’re becoming more and more the norm. One thing that’s awful about jumbo mortgages is that until earlier this year you would be hard pressed to find one that wasn’t VRM or variable rate mortgage.
If you’re not from Canada, this is the same as an ARM; they will float up and down with the prime and usually enjoy a really low interest rate the first few years. Depending on how your mortgage is structured the pain could come in 2, 5 or even 10 years from the time your loan is originated. This is where we come in!
Understanding Fixed Rate Interest
As Toronto mortgage brokers we’ve seen it all and we know what you have to do to get the right mortgage. Most will want to try and find a Canadian fixed rate interest mortgage. These mortgages won’t float up and down with the prime like their VRM cousins. The rate that you lock in now will generally be the same rate that you get for the life of your loan, but you’ll want to make sure you work with one of our Canada mortgage brokers so you know that you’re getting the best deal.
Sometimes Maturity is a Bad Thing
When looking at VRM mortgages, you’ll hear stuff about “maturing”. Maturing is one of the worst things that can happen; once they hit a certain “age” you’re going to be on the hook for double digit interest that balloons overnight. If you’re going to go with one of these, talk to us first. We’ll help you understand if you can pay it off before it matures or if you can transition it into a fixed rate at a later date and save money that way.
How Much Time Do You need?
Depending on how much time you need will make the difference in what kind of mortgage you choose. If you want a mortgage that you can repay quickly but don’t mind paying off a bulk payment at the end, a VRM jumbo loan might be the right choice for you. If you’re going to need more time to pay off your mortgage (5-15 years or more) you may want to go with a fixed rate.
Inflation is around the corner and it never hurts to explore your options. If you’re trying to find the mortgage that’s right for you, give us a call. We’ll help you find the option that fits you best!