With the central bank's key interest rate at a low, fixed and variable mortgage rates are even closer than ever leaving home owners with the big question: do I go fixed or variable? Jessi Johnson, a Vancouver-based mortgage broker answered your questions about fixed and variable mortgages and other questions about mortgages and mortgage brokers.
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Mortgages: Fixed or variable?
12:58 Gillian - Welcome to the Globe Personal Finance online discussion about mortgages. Our guest is Jessi Johnson, a Vancouver area mortgage broker.
12:58 [Comment From JessiJ]
Good morning (West) and afternoon (East)
12:59 Gillian - So Jessi, what are things like in the Vancouver mortgage market right now?
12:59 [Comment From JessiJ]
Surprising still active but it depends on what you are targeting...
1:00 [Comment From JessiJ]
For example, purchases have slowed down but we have a tremendous amount of people refinancing these days.
1:01 [Comment From JessiJ]
Generally sales slow down in November and don't pick up until mid-end of January.
1:01 Gillian - Are people refinancing because their previous rate is too high or are they trying to take advantage of a better longer term rate?
1:02 [Comment From JessiJ]
I would say it's more of refinancing to take advantage of low interest rates but also to consolidate debt...
1:02 [Comment From JessiJ]
Anytime you have higher interest loans, it's a good idea to consider consolidating them into a lower rate. However...
1:03 [Comment From JessiJ]
you don't want to get into the habit of doing this and using your home as an ATM.
1:03 [Comment From JessiJ]
We generally suggest that any increase in cash flow received from consolidating debt is put back into the mortgage. This increases overall savings and ...
1:04 [Comment From JessiJ]
if you are used to paying “X” amount each month, it's a good habit to continue with that.
1:04 [Comment From Guest]
The prime rate is still low compared to pre-recession of ‘08 levels. Variable rates are still very low and penalties are lower.
1:04 [Comment From Brian]
Is there a difference in the payment a broker receives from the lender for a fixed vs. variable rate?
1:05 [Comment From JessiJ]
Please clarify your question (from guest), thank you
Gillian - How about we answer Brian's question.
1:05 [Comment From JessiJ]
Brian: Nope, most deals pretty much pay the same. To be honest, where you see different commissions is in the term
1:06 [Comment From Guest]
I was supporting variable mortgages.
1:06 [Comment From Sam]
How long have you been a broker?
1:06 [Comment From JessiJ]
Shorter terms pay less to brokers and bank reps (as far as I know) but technically they pay more because there is a refinance coming up in a shorter period of time.
1:06 [Comment From JessiJ]
6 years
1:07 Gillian - Are you going with more variable or fixed mortgages these days Jessi, and why?
1:07 [Comment From JessiJ]
I, too, support the variable, historically it is a better way to go.
1:07 [Comment From JessiJ]
However, these days the VRM and fixed are so close... fixed is a very good option.
1:07 [Comment From Brian]
I would assume the longer the term the higher the commission? Do you consider this a conflict of interest when advising clients? Do you disclose this information?
1:07 [Comment From JessiJ]
Fixed vs. VRM... it really depends on the client.
1:08 [Comment From JessiJ]
Brian... yes but as mentioned, when the refinance (shorter term) comes up there can be commission again so it evens out.
1:08 [Comment From Guest]
What would your position be if prime was to fall by 0.5% next year and remain below 1% for the next 24-36 months?
1:09 [Comment From JessiJ]
We ask a number of qualifying questions to figure out what is best for the client. Present them with a number of options in their best interest and then give them the choice.
