Thinking about buying a new home? If so, you probably have a few questions about a very important detail called interest rates. Interest rates are everywhere when you talk about mortgages; you will probably hear a lot more than you will ever want to. And all that talk can be very confusing. Let's try to clear things up a little bit.
First of all, the interest rates you need to worry about are the ones you will be paying on your mortgage. While these are tied in part to the interest rates dictated by the Bank of Canada, the rates you hear on the news will not be the same as those charged in your mortgage. They are loosely tied together though. When the national interest rate goes up, so will the interest rate people pay when they take out a mortgage loan on a home. The same is true when interest rates go down.
This could mean that buying during a low interest cycle would be the best move, but there are different types of mortgages too. People who buy a home with fixed mortgages will pay the rate quoted to them by the lender for the term of the mortgage; usually five years. They will no longer have to worry about the impact of the national interest rate on what they are paying for their home.
However, if a floating mortgage has been selected as the loan type, it can really effect a person's mortgage payments on their real estate. Floating mortgages mean that the interest rates change over time; they can go up and down. They are great when interest rates are sinking and predicted to sink further, but not so great when interest rates are rising. In fact, they can be downright disastrous for home owners if interest rates really start to spike. Before you take out a floating mortgage, then, make sure you research what the national economy is likely to do and how the Bank of Canada will react.
While the national interest rates will remain static, lender interest on mortgage is anything but. There are percentage points based on the term of the loan, the number of payments you are making per month, and the lender itself. Careful research of a number of different mortgage rates before you buy because it can mean saving thousands on your business each year.
Why so? Because the interest rates are what you really have to worry about when you buy. Even a tenth of a point can mean paying hundreds of dollars more a year on the loan, driving up the actual purchase price of your home.
Available mortgage types.
Best mortgage interest rates.