A rate drop next week would of course be excellent, it’s another .25% in what is hopefully a string of drops. If further rate drops are coming, the question that keeps coming up is “What happens when things stabilize?”
Current thinking is that we’ll end up with a ‘good’ fixed rate of 4 - 4.25% and a variable prime rate of between 4.70 and 4.45% ( does not include the discount provided by most lenders). Economists believe that a robust stable economy will support rates in that range for perhaps the next ten years.
That’s good news given the rate environment for the last 18 months but really, there is some rationalization to come for those of us in low fixed rate mortgages. We still need to plan for the next step and possibly the one after that, in order to ensure we minimize the shock of new, higher payments.
Planning for every change is essential and ensuring that you preserve your existing low rate as long as possible is vital.
Here are some workarounds for now and some thoughts for future planning:
For Renovations:
Leave your existing first mortgage in place and finance the renovations with a HELOC or second mortgage.
Moving?
If allowable, port your mortgage. If needed blend in extra fund but do not extend the term. What looks like an attractive rate for an extended term may be far higher than what’s attractive two years from now.
Assuming a mortgage?
Some mortgages may be assumable and sellers feature this to encourage purchase. If you qualify, it’s important to keep the terms the same and not extend.
Plan For Renewals
As I’ve said before, your existing lender does not prioritize the your renewal, largely because they already have you on their book. They’ll spend as little time as possible negotiating with you because they are used to people signing the first offer and they know you think you are ‘stuck’ with them. Nobody in the branch is getting paid to help you with the renewal.
A mortgage broker can provide you with comparable options for you to use with your lender.
If negotiations fail, it can be surprisingly easy to switch to another lender, at no cost, but you need to engage with a mortgage broker to assist you with your negotiations first.
Call anytime, I’m here to help.
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