Fixed vs variable. Hw many years?

[hannamaren]

Mortgage question. I know the definition, but how did you decide fixed vs variable and for what term?

[LoveTrains]

My understanding is that you folks in canada dont' have access to a 30 year fixed like we do in the US.

In the US, there is no reason to choose an ARM right now because 30 year fixed is like 3.5% right now.

[zacksbride]

Sept 8, 2012 22:13:12 GMT -5 @vicmo said:

We went with fixed for 5 years at 3.79%, 3 years ago. We just refinanced to fixed for 5 years at 3.09%.

Personally, I don't like the risk of variable - and since rates are super low right now, I feel pretty good about sticking with that rate for 5 years. Our mortgage broker advised us not to go for 10 years (which would have been about 3.99%) because it was almost 1% higher than the 5 year rate.

5 year mortgage?!? WOW!

[Deleted]

Sept 8, 2012 22:13:12 GMT -5 @vicmo said:

We went with fixed for 5 years at 3.79%, 3 years ago. We just refinanced to fixed for 5 years at 3.09%.

Personally, I don't like the risk of variable - and since rates are super low right now, I feel pretty good about sticking with that rate for 5 years. Our mortgage broker advised us not to go for 10 years (which would have been about 3.99%) because it was almost 1% higher than the 5 year rate.

We have a 35 year amortization mortgage but we're 2 years in. I don't think you can go past 25 years now?

I think you'll do better 90% of the time with variable. But since rates are so low, we felt very comfortable with fixed. We did a 3.29 five yr rate. The premium for > 5 yrs didn't seem worth it.

[Deleted]

Sept 8, 2012 22:23:33 GMT -5 zacksbride said:

5 year mortgage?!? WOW!

In Canada, the typical mortgage is what you'd call a 5 year ARM. your rate is only fixed for 5 years and then you have to completely renew at the existing rates, at the end of the 5 yr term.

[zacksbride]

Sept 8, 2012 22:31:12 GMT -5 @vicmo said:

Sept 8, 2012 22:23:33 GMT -5 zacksbride said:

5 year mortgage?!? WOW!

No, it's a Canadian mortgage - similar to an ARM. You can have a variety of term lengths (1-5, 10 yrs) for which your rate is fixed, but it would be amortized over 15-35 years like an American mortgage. Then you go back when the term is over and get a new mortgage. My mortgage rate is fixed for 5 years, but amortized over 25 years.

Ahhhh, makes much more sense now!

[Deleted]

At least in my understanding an ARM is a irresponsible financial move to make. You buy a house that you can afford at that time with an interest rate you can afford at that time and then 5-10 years down the road that rate can change. I have a friend that go an ARM and lost her house because she couldn't afford to make the payments when they doubled her interest rate.

[Deleted]

Sept 9, 2012 2:13:38 GMT -5 @246baje said:

Sept 9, 2012 0:09:34 GMT -5 @sounderschick said:

At least in my understanding an ARM is a irresponsible financial move to make. You buy a house that you can afford at that time with an interest rate you can afford at that time and then 5-10 years down the road that rate can change. I have a friend that go an ARM and lost her house because she couldn't afford to make the payments when they doubled her interest rate.

Have you read any of the previous posts?

And even in the US an ARM is simply another option that can be to one's benefit if you enter into it with all of the information.

No I didn't. Growing up I was taught that an ARM is not something one should ever do. I'm just going off what I was taught and told by several people including the mortgage broker we talked to.

[hannamaren]

I had a feeling this might be a Canadian-American difference.
Thanks to all the posts.
Most people seem to be saying 5 yr fixed is the smart move. And now, rates are low, so okay. Variable freaks me out!

[AAM2012]

Sept 9, 2012 2:24:40 GMT -5 @sounderschick said:

Sept 9, 2012 2:13:38 GMT -5 @246baje said:

Have you read any of the previous posts?

And even in the US an ARM is simply another option that can be to one's benefit if you enter into it with all of the information.

No I didn't. Growing up I was taught that an ARM is not something one should ever do. I'm just going off what I was taught and told by several people including the mortgage broker we talked to.

Our friends have an ARM that just adjusted to a much lower rate than what we currently have. They have no reason to refinance until their rate goes up..which may be years from now.

[jinnifah]

Yeah, we did the 5yr fixed too. The rates were so low it seemed like variable would be more likely a disadvantage. 5yr seemed the best compromise of length and rate

[Deleted]

Personally an ARM scares me. I've been up close and personal with the bad side of them and grew up being told they are irresponsible and don't ever do one. I personally would never be comfortable having an ARM.

[heygrey]

Sept 9, 2012 10:51:44 GMT -5 @sounderschick said:

Personally an ARM scares me. I've been up close and personal with the bad side of them and grew up being told they are irresponsible and don't ever do one. I personally would never be comfortable having an ARM.

then don't move to canada.

[heygrey]

Sept 9, 2012 11:00:53 GMT -5 @missuskeekers said:

Also.. Milk bags? This must be an east coast thing because I know not what you are talking about.

i think so.

i just mentioned milk in a bag to h (because of this thread) and now he's all nostalgic for it. (he grew up in halifax.) we don't have it in bc that i've found.

[LoveTrains]

Sept 9, 2012 10:51:44 GMT -5 @sounderschick said:

Personally an ARM scares me. I've been up close and personal with the bad side of them and grew up being told they are irresponsible and don't ever do one. I personally would never be comfortable having an ARM.

You know they don't have fixed term mortgages like we do in Canada, right? Did you read any of the responses? They only have ARMs in Canada.

Perhaps you should read and comprehend the posts before you post next time.

[Deleted]

I guess I'm just not understanding what the posts are saying.

[papie]

We fixed for 5 years recently. The rate was awesome, it was much higher for 10 years.

[Deleted]

Even in the US an ARM isn't necessarily bad.

We are 3 years into a 10/1 ARM which means we have a fix rate for 10 years and then it can adjust once a year after that. It has a maximum adjustment of up/down 2% each year and a lifetime cap or something like 5-6% higher than what it started at. Obviously we don't want to pay 6% more (that would be about 11% interest rate!) but it also wouldn't suddenly double our payment and it would take almost 14 years from the time of purchase to get up to that rate.

Now if this was our forever home I may feel differently, but if we still live here 14 years after we bought the house I'm going to die. We don't even want to live in this state that long.

We're considering refinancing and may do a 5 year ARM because we don't have 20% equity and a fixed rate isn't offered on the type of loan(s) we have (we did an 80/20 loan with 2 mortgages). I think we could refinance to a fixed rate loan but we'd have to start paying PMI. I'm currently working on this with a mortgage lender so please pardon me if I'm slightly wrong on the details for that part! I know they are correct on my current loans.

[Deleted]

Sept 9, 2012 14:35:21 GMT -5 @sounderschick said:

I guess I'm just not understanding what the posts are saying.

We only have the US-type ARM here. There isn't a 25-year rate. I believe 10 years is the max to guarantee a rate. Normally, amortization periods range from 20-30 years. They used to have a 35-year rate.

Our housing market, thus far has been fine. Theoretically, there is more risk to not knowing your rate for 20 years but usually when you renew your rate the difference is like 0.5-2%, and they may have gone down which works in your favor.

[Deleted]

Hanna - I'm a realtor and 80% of my clients do fixed rates. Maybe more.

Depends on a lot f things - maybe review your personal scenario with a few different mortgage brokers and see what they think.