Mortgage Rates | Fixed Mortgage Rate Increases | How Increased Rates Affect Borrowing Power

In this video I discuss how the increasing fixed rates affect your ability to qualify for a new mortgage. It also explains how higher rates are harder to qualify for than the variable rate mortgage option.

So in this video we’re going to discuss how increased fixed rates affect you as a buyer or affect you if you’re trying to refinance your existing mortgage so i think the one misconception that i come across most often is i’ll have people call me and they’ll say what’s your best five-year rate and there’s actually two scenarios for five year fixed rates so

There’s one that’s a purchase so you’re purchasing a new property and you have less than 20 percent down so you’re looking at a high ratio mortgage these mortgages always require mortgage default insurance and when you’re doing this the rates are actually a little bit lower than if you’re refinancing because refinances only allow for up to 80 percent of the

Value of your property that means that there’s no longer any mortgage default insurance applied to that mortgage and with that the risk to the lender actually goes up a bit because they don’t have the security of cmhc or other insurers to back them up if you default so because of that risk they actually charge a little bit more on your five-year fixed rate so if

You call me up and you’re looking to refinance and your bank let’s say td or scotia they are showing on their website a rate of let’s say 4.09 something in that range then you can pretty much 100 know that that is their insured purchase rate if you call them and ask them for their uninsured refinance rate they will give you a different rate so don’t be lured

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By thinking that your bank is going to give you a lower rate that a mortgage broker can because most times that’s not the case as a matter of fact if you get your renewal in the mail and you look at the rate chances are it’s way higher than any you have seen and the reason for this is because most banks know that it’s a bit of a pain for you to collect all the

Required documents for you to re-qualify for that mortgage than it is for you to simply sign that renewal and just go on with your your merry life however just keep in mind that if you do do that you’re leaving a bunch of money on the table so most people are rate conscious and they know that in order to get a lower rate they’re going to have to renew they’re

Going to have to requalify now if your situation has changed and you know you found yourself unemployed or you have a different job type or you know you’re still at a probation period and you get a renewal in the mail grab it sign it press hard run fast because you’re not going to have to requalify for a renewal but you will get a higher rate now how is this

Going to affect qualifying the fact that fixed rates have now gone up so as of yesterday may the 9th 2022 fixed rates have now gone up so the lowest uninsured fixed rate that you can get through the broker channel is 4.19 the lowest insured rate for a purchase so less than 20 down you’re looking at 4.09 for a five year fixed so what do i recommend to my clients

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I still like variable rates historically if you look at the charts over the last 10 15 years if you have been in a variable rate mortgage you have paid less interest than in a fixed product so i explain the differences i let them know the risks associated with it but at the end of the day if you want to purchase a property and you want a variable rate mortgage

You’re still only going to have to qualify at the benchmark rate the stress test rate which currently is 5.25 however if you wish to purchase a property and you want a five-year fixed rate let’s say at 4.09 you are gonna have to qualify at the benchmark rate or contract rate plus two percent whichever is higher so that would mean that now instead of qualifying

At 5.25 you’re going to qualify at 6.09 percent and you know what that’s going to do that’s going to make it so that you qualify for a lot less house than if you get a mortgage with a variable rate so these are the issues that you have to discuss with your mortgage professional figure out what works best for your long-term plans what you’re planning on doing for

The next five years is key do you want to see more of this content subscribe like and i’ll see you in the next video

Transcribed from video
Mortgage Rates | Fixed Mortgage Rate Increases | How Increased Rates Affect Borrowing Power By Alberta and B.C. Mortgage Tips and News