   Buying a Home in This Market.
  So, I'm looking at real estate (in Canada) these days in order to take advantage of the economic slump in prices. I plan on moving in by Christmas time. I've seen many bank 'experts' which threw a ton of information at me, which I'm having trouble sifting through. basically, some told me to stick with the variable rate because it will stay very low for at least 5 years (lowest I seen is at 2.8%). Some told me to get the 10yr fixed rate because it will stay (at around 5.25%) solid even when the economy swings out of the recession. Some told me to get a 5yr fixed rate (at around 4%). My problem is that these people are just making assumptions and I don't know which one to trust more. Has anyone bought a house recently and had to make this sort of decision? Did you go Variable or Fixed rate? Which banks are best?   
  I was about to post this thread yesterday, and thought better of it.  So I'm interested too!  I can probably scrape together about a 15% down payment on a reasonable new home around here, and I have no idea what to look for in a mortgage, let alone in this unusual market.   ;  I think your decision should really be based on what you can afford and how comfortable you are with risk.I usually go for a fixed 5 year term with my homes but that is mainly because I don't like surprises.Interest rates have been low for a long time now. Heck they were low when I bought my first home and that was 10 years ago. However, there was a time (your parents may be able to tell you) when interest rates were very high (over 13%).I don't know if we will see rates that high again, however I would at least plan for it just out of the sake of security. When this recession ends, the banks are going to be looking at recovering lost income and interest rates may be where they do it (this is speculation entirely on my part and not based on any fact).I would say go with what you are comfortable with and purchase a home that you could afford the payments on even if rates went as high as 15%. They likely won't, but if they do you are not going to be in a bad situation.Also, you could always do the math on a higher interest rate and apply the difference on higher payments to pay down your principle faster. Then, if the rates go up in a few years, you can keep the same (or close to the same) payment.John   ;  Thanks for the tip. I'm actually looking for something that I alone could afford (excluding my fiancee because she will eventually go on maternity leave, etc). So, I got approved for $400,000 but I'm looking for houses in the range of 200-250K, which is a decent family home in Ontario. The reason why I ask this is because the difference between 3.75% and 5.25% is roughly $55,000 at the end of my mortgage and I, for one, would like to pocket that cash rather then it go towards interest.I'm fully aware of the risks of going Variable over Fixed.   ;  Ive got a flash app 'is it better to buy or rent' (google) new yourk timeshave a search for it (after youve tried it out u may decide not to buy)eg for $250,000 5.25% interest + $1100rent monthafter ~50years u may break even! (until then renting is far better);  I just bought a house with a fixed term of 30 years (the maximum out here) at 5.85%. Interest rates are at an all-time low. Personally I'd recommend going for an as long as possible fixed term. Do take into account the interest rate difference. If you have an accountant or mortgage advisor he can tell you this. Im my case, it turned out that the difference between the interest rate for a 15 year fixed term (which was slightly lower) and the 30 year fixed term was about 4 euro per month.Note that the lowest interest rate I've seen around here was something like 4..8-5.2%. That's for 5 years fixed term. Nothing as low as the 2.8% you quote.Just have your advisor calculate the monthly payments for 5, 10, 15, etcetera years fixed term and see how much it matters.   ;  In Canada, the rates are really low but you cannot get anything longer then a 10yr fixed rate. Most banks don't offer 10yr and the max they offer is 7yr. It's all to maximize profit and screw us over. I believe IGN has 2.8% but I've been hearing their name in the news lately and I don't feel as good going with them. Quote:Ive got a flash app 'is it better to buy or rent' (google) new yourk timesI did something similar in a spreadsheet and if you look at it from a 25yr perspective, you save about $30,000 when renting. Not a whole lot over 25yrs. What those things don't take into account is the fact that after the 25yr period, I'm not paying anything more then utilities and property tax so the amount I spend is waaay lower then renting. That $30K comes back to me in no time while you're still renting. Also, if you put more money into your mortgage, you pay less interest over time, speeding up the process at which you pay back the mortgage (for an extra $200/mo, you pay the debt off 4 years faster!).But, I regress. Since 30yr fixed mortgages don't exist here, I'm sort of leaning towards Variable rate... kind of.   ;Quote:Original post by SanderPersonally I'd recommend going for an as long as possible fixed term.No to the first part, yes to the second part.You want as SHORT as possible loan, but you really want a fixed term loan.Recall that the biggest part of the mortgage crisis is the 5-year adjustable mortgage.  You do not know what your home will be worth in five years, or what the economy will look like, or what interest rates will be.  Maybe it will be better, maybe it will be worse.You want the shortest possible loan, for reasons in the next quote:Quote:Do take into account the interest rate difference. If you have an accountant or mortgage advisor he can tell you this. Im my case, it turned out that the difference between the interest rate for a 15 year fixed term (which was slightly lower) and the 30 year fixed term was about 4 euro per month.I'm not quite sure how to read this since it could be interpreted either way.Quote:Just have your advisor calculate the monthly payments for 5, 10, 15, etcetera years fixed term and see how much it matters.Very smart.Consider 150000 @ fixed 5% interest: 15 year  30 year=======  =======Payment   1186/month    805/monthInterest paid  63514    139884 You want the shortest term you can reasonably afford.  The shorter the term, the less money you pay in interest.Also, observe that Base rates are lower than they have been, in 314 years of tracking.  It is lower than 1694 when the Bank of England had similar rates, which were still higher than today's.You can get an adjustable rate and hope that somehow rates will remain this low, or you can lock the rate in, guaranteeing that you will keep the low rate.  Yes you will pay a very small percent penalty to get it fixed over the long term, but it isn't that bad.In the extremely unlikely event that interest rates drop even more, you can refinance to another slightly lower fixed rate.That way, you won't have to worry about the interest rates when the 3/5/10/15 year term is up.   ;Quote:Original post by SanderI just bought a house with a fixed term of 30 years (the maximum out here) at 5.85%. Interest rates are at an all-time low. Personally I'd recommend going for an as long as possible fixed term. Do take into account the interest rate difference. If you have an accountant or mortgage advisor he can tell you this. Im my case, it turned out that the difference between the interest rate for a 15 year fixed term (which was slightly lower) and the 30 year fixed term was about 4 euro per month.Note that the lowest interest rate I've seen around here was something like 4..8-5.2%. That's for 5 years fixed term. Nothing as low as the 2.8% you quote.Just have your advisor calculate the monthly payments for 5, 10, 15, etcetera years fixed term and see how much it matters.Well, nice to hear I'm not the only one!Bought our first house last november: 30 years fixed interest at 5.8%. That means that no matter which direction the economy goes, I know how much I'll be paying for the home my family is living in.Yes, I might end up paying more if interest drops and stays low. On the other hand, interest in the Netherlands has been above 10% as well, at times. I'm okay with paying somewhat more in the long run, but having good, nightmare free sleeping time. :);  Hmm, interesting. Does anyone know of a website that has been tracking mortgage rates for the last 25+ years? A bar graph would be nice or some sort of table with percentage values.I want ot compare the way the economy recovered in the 80s when there was a slump.   