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July 3, 2013
Mortgage rates across the board are at all-time lows in Canada, a fact which has led many people to buy. Recent trends suggest these figures may go even lower, which comes as a breath of fresh relief for those economists predicting a rate spike. However, financing now is recommended due to the unpredictability of the market and the equal possibility that rates will revert to higher numbers. One loan type in particular that has garnered a substantial amount of attention and subsequent applications is the 5 year mortgage. In Canada, lenders offer both fixed and variable rate options for these loans. Shorter term loans have historically provided buyers with lower rates in comparison to their 10, 15 and 30 year counterparts, namely due to the fact that the monthly payments are higher and the risk to the lender is much lower (the loan is paid of much quicker).
If you are thinking about financing a home, be sure to take a close look at an amortization table. In essence, this chart breaks down exactly what happens with the loan over the course of the term. It details how much of your payment is going towards the principal and interest each year and also tells you the total amount you will have paid at the end. This last part is enough to make some people queasy, and why more and more buyers are saving up for larger down payments. Securing a super low fixed interest rate on a 5 year term will save you a massive amount of money and allow you to pay off your mortgage in due time. With rates as low as 2.64%, you simply can’t beat the market. According to Doug Porter, chief economist for BMO Capital Markets, “given that the most likely trend in interest rates is upward and that longer-term interest rates are likely to move first, we believe locking in for five years is the superior choice” (Kwan, 1). To offer some insight on how 5 year mortgages in Canada have changed, here is some helpful information regarding the last 5 years’ worth of data.
Why financing a 5 year mortgage term is a good idea
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