There seems to be a common thread among economists when it comes to deciding which rate is better, a variable or a fixed rate mortgage. YOu may be surprised to hear that the difference over the the long run is likely to be minimal.
Moshe Milevsky, associate professor of finance at York University, studied mortgage rate data from 1950 to 2007 and found that choosing a variable rate mortgage would have saved Canadians $20,000 in interest payments over 15 years, based on a $100,000 mortgage.
He also found that Canadians would have been better off with a variable rate mortgage compared to a five-year fixed rate 89 per cent of the time.
The question is whether this other 11 per cent of the time when it is advantageous, is right now, said Benjamin Tal, senior economist with the CIBC World Markets.
“This is one of the few examples of times when it really doesn’t make much of a difference. If you take variable and I take fixed now and we meet five years from now, you would probably be able to buy me lunch, but it would be a cheap lunch.”
That’s largely because interest rates are so low right now. Economists are expecting rates to increase by about half a percentage point or more beginning in June, with further rate hikes to come in 2011.
A loan modification is a modification to the terms of an existing loan made by a lender in response to a borrower’s long-term inability to repay the loan.
ReplyDeletewhat is a loan modification california