I/o is especially advantageous if the property has strong capital growth. Basically decent suburbs in Sydney. However, a lot of the less desirable areas can be a gamble as covid saw them go on a roller coaster with values
Definitely. Using them in a low equity position is risky.but if you have enough equity in your home to survive dips in the market, why pay it off? Then what? Your cash flow is better, but your P&L is locked in at the market appreciation rate and you can never access it.
I’ve never looked at the npv of the cash flows, specifically, the MIRR of investing the principle payment and paying interest forever vs paying the house off and sitting in 3-5% long term gains on it.
fuck that rate changing every 5 yrs bullshit, canada’s housing market is way more fucked than ours.
A 40 year AM is in the process of being approved at lenders to offset the rates. (I work in the industry)
Locking in long term IS the way to go. Fuck being at the mercy of current rates every five fucking years, lol, holy fuck.
Lock in a 20 or 30yr loan, and if rates get lower, simply refinance, any time YOU want, IF you want.
Right now I’m locked in at 3.125%…if it gets lower, I’ll fucking refi and get the lower rate. If not, I’ll never pay more than 3.125%.
You can get 10 year here if its not underwritten by cmhc. 20% down.
You can ammortize to 25 or less.
For a good 15 year stretch in Canada variable outperformed locked.
Not really possible since you have the option to re-lock at the lowest rate when it appears, and then only ever refi again if it gets even lower. Meaning, your rate only ever goes DOWN. How the fuck is a variable ever going to top that?
Because in that time variables were - prime and locks were closer to prime. And once locked you pay to get out and refinance. And oys variable meaning your rate goes down while payment stays the same so more goes to principle.
The fact is, variable rates tied to prime have always outperformed locked in rates over a long ammortization. It just so happens that covid and all the underlying eff3cts of lockdowns caused inflation and rates to go up.
A correction to terminology. Its variable vs fixed rate. Either can be open or locked. If locked the variable still changes with prime but you are locked for the term. Same with fixed except the rate stays the same.
That’s great for you but it’s just not an option in Canada. Unless you’re putting 20% down it’s every 5 years or go get yourself an apartment.
We do both
We can take a 30 year “fixed” or “variable” rate mortgage
But we have to refinance after 5 years max
So we are still approved for the mortgage but if we chose “fixed” it is now “fixed” at the current rates
Does that make sense?
The one thing Canada has that the US doesn’t is that they let you port your mortgage to another property. I’m not sure why we don’t allow that.
Variable always outperforms fixed over the term of the mortgage
Find any 20-25 year stretch
Not for people like me who have 3% locked in. Everyone I know with a house refied in 2019 and got at least a point knocked off. I don’t know anyone with over 4.125% anymore. I also have over 100% equity in my house.
Are you in the USA?
If you read the thread. Canadians can’t “lock in” for any longer than a 5 year stretch
That shit sounds like an ARM with extra steps. I’ll take a 15-30 guarantee.