2 ms·

> Interest rates can rise, which would increase the mortgage. Mortgages are nearly always fixed rate, so that can't happen. That's the beauty of a mortgage, it

by jjav 5y ago

> Interest rates can rise, which would increase the mortgage. Mortgages are nearly always fixed rate, so that can't happen. That's the beauty of a mortgage, it can only ever go down, never up. But you're right in that variable rate do mortgages exist, but it would be very foolish to ever take one. Don't do it. Always go fixed rate, you can always refinance down if the opportunity arises, or stay the course if not.

wiredfool 5y ago
In the US, a 30 yr fixed is the "standard", and even that is not the overwhelming majority that it used to be, with ARM and other financial engineering. Also, The ARMs tend to be lower rates than fixed in the US. My experience holding mortgages over the last 20 years in the states, ARMs were a strictly better option and would have saved me a ton of money, even with Refis by paying down the principle faster. But, The last 20 years are unlikely to continue, as it's been a long term decreasing interest rate environment, and there's a limit to how long and far that can happen. Elsewhere, fixed rates are the exception. And oddly, fixed rates are cheaper in Ireland at least, but with the caveat that you're stuck with the mortgage for the time of the fixed term, unless you are willing to pay a penalty. Forex, I could have had a ~4.x%~ 3.7% adjustable, or a ~3.5%~ 2.9% fixed for 3 years. Amortizations being what they are, the ~3.5%~ 2.9% rate pays down much faster. (edit -- just checked the actual current rates, which are probably closer to accurate than my just post coffee memory)
HPsquared 5y ago
The fixed rate thing makes a big difference. I'm based in the UK, where most banks only offer fixed rate up to about 5 or 10 years. Interesting that it seems to vary by country.
- karatinversion 5y ago
  Long term fixed rates are a major public policy objective in the US; they are much less common where that is not the case.
auxym 5y ago
The article is about Canada, which has 5 years maximum mortgage term. After 5 years, you need to renew your mortgage at whatever interest rates are currently available.
- refurb 5y ago
  Yup. If housing drops and/or interest rates climb it will get interesting in Canada: - you basically refinance every 5 years at max. If you’re underwater on a house, the bank will ask for cash to hit the desired loan-to-value. - If rates go up you’ll need to be able to afford the higher payments or no mortgage. Luckily they are doing a “stress test” and you need to qualify at 5.XX% today. So there is buffer. - most of Canada has recourse loans. If you sell and don’t pay off the mortgage, the bank can come after you for the difference.
- throw0101a 5y ago
  > which has 5 years maximum mortgage term. Not maximum, but most typical. You can get, e.g., 10 year mortgages: * https://www.ratespy.com/best-mortgage-rates https://www.ratespy.com/best-mortgage-rates
deleted 5y ago
[deleted]

by jjav 5y ago

wiredfool 5y ago

In the US, a 30 yr fixed is the "standard", and even that is not the overwhelming majority that it used to be, with ARM and other financial engineering. Also, The ARMs tend to be lower rates than fixed in the US. My experience holding mortgages over the last 20 years in the states, ARMs were a strictly better option and would have saved me a ton of money, even with Refis by paying down the principle faster. But, The last 20 years are unlikely to continue, as it's been a long term decreasing interest rate environment, and there's a limit to how long and far that can happen. Elsewhere, fixed rates are the exception. And oddly, fixed rates are cheaper in Ireland at least, but with the caveat that you're stuck with the mortgage for the time of the fixed term, unless you are willing to pay a penalty. Forex, I could have had a ~4.x%~ 3.7% adjustable, or a ~3.5%~ 2.9% fixed for 3 years. Amortizations being what they are, the ~3.5%~ 2.9% rate pays down much faster. (edit -- just checked the actual current rates, which are probably closer to accurate than my just post coffee memory)

HPsquared 5y ago

The fixed rate thing makes a big difference. I'm based in the UK, where most banks only offer fixed rate up to about 5 or 10 years. Interesting that it seems to vary by country.

karatinversion 5y ago
Long term fixed rates are a major public policy objective in the US; they are much less common where that is not the case.

auxym 5y ago

The article is about Canada, which has 5 years maximum mortgage term. After 5 years, you need to renew your mortgage at whatever interest rates are currently available.

refurb 5y ago
Yup. If housing drops and/or interest rates climb it will get interesting in Canada: - you basically refinance every 5 years at max. If you’re underwater on a house, the bank will ask for cash to hit the desired loan-to-value. - If rates go up you’ll need to be able to afford the higher payments or no mortgage. Luckily they are doing a “stress test” and you need to qualify at 5.XX% today. So there is buffer. - most of Canada has recourse loans. If you sell and don’t pay off the mortgage, the bank can come after you for the difference.
throw0101a 5y ago
> which has 5 years maximum mortgage term. Not maximum, but most typical. You can get, e.g., 10 year mortgages: * https://www.ratespy.com/best-mortgage-rates https://www.ratespy.com/best-mortgage-rates

deleted 5y ago

[deleted]