Variable rate Open Mortgage Vs Fixed rate Closed Term

[Fenton]

Hi,

I am shopping around for a new mortgage for a purchase. I would like to take a variable rate open mortgage to start with. While having this mortgage, would a any bank give me firm quote for a fixed rate closed term mortgage? Say valid for 30-60 days. Or do they tie the fixed rate to the prime in their offer

Variable has the lowest rate right now, but I am worried about a rate increase. I am wondering whether the strategy given above is workable.

I appreciate your comments. They are very helpful for a newbie like me!

[beaux]

Fenton-

What you should do is tell the lender that you are dealing with that you want a flexible mortgage that is currently floating, but you also want the OPTION to fix the rate on short notice. I assume that the lender would be able to convert your floating rate mortgage into a fixed rate mortgage quite easily, just be aware that the lender will not likely be able to hold a rate for very long unless they allow you to hedge your mortgage and buy a forward rate lock (do they do this in residential?). Certainly the big boys, TD Bank, Scotiabank, RBC, have these types of products available for you. I would speak to whatever lender you have an existing relationship with and see whether they have a product that works for you. In my experience they are all basically offering the same products with minor variations. There have been some very compelling articles recently suggesting that it pays off to stay with a variable rate mortgage. It all depends on your personal threshold for risk. Personally, I feel that if you can lock-in a 5 year mortgage for 5.3%(http://www.tdcanadatrust.com/mortgages/numbers.jsp)
it's hard to go wrong.

My 2 cents.

Beaux

[eldon_siemens]

I agree with beaux, but would like to add a comment.

If you have developed a relationship with one lender, it is great to deal with that person/institution. It is true that most lenders offer roughly the same range of products.

If you are shopping around, I suggest you deal with a mortgage broker. Brokers are not affiliated with any specific institution and can look for the product that best suits your needs. Most importantly, when you are applying for financing, the broker will do one credit check and provide it to all potential lenders. You may not be aware that every time someone does a credit check it is recorded, and every subsequent check reduces your chances of qualifying with the next lender. (If this doesn't make sense, ask a broker to explain your Becon score).

Good luck in your search.

[Harvey]

You can get an OPEN variable rate at 3.50% currently. Ask your broker to get you pre approved at another bank for up to 120 days to take the worry out of it. Some will some won't.

Currently a fixed rate mortgage is a 73% premium to a variable rate. Best variable rate closed is Prime -.75. Don't be fooled by the gimmick short term discounts they are never as good as Prime -.75 except for one that offers 1% cash back but you have to invest the cash back amount in a RRSP to get the same rate of return.