本文发表在 rolia.net 枫下论坛1. Prepayment options (or plans) and interest options are all important factors to the cost of a mortgage. For prepayment options, there is limited bargins available and most of borrowers could not benefit the full capacity of prepayment allowed, say how many people can afford 15%+15% plus double-up payment or payoff within 3-4 yrs? To me, 15%+15%(BNS) or 20%+20%(BMO), same thing. Even like RBC 10% +10% does not bother me.
2. There is no evidence to say that short mortgage repayment period is good for Variable Rate mortgage (VRM) and Fixed Rate MTG(FRM) benefits for long amortization. I cannot predit the future rate trend, but last 25 yrs history shows VRM was better for most of the time no matter it was in 3 yrs or 25 yrs.
3. Within your example, VRM will never last longer than 25 yrs in Canada. Please check your mortgage agreement, it should be a provision that bank will call you to increase your payment once the int rate reaches certain level. Honestly, your example is irrelevent to the discussion.
4. There is a risk for 5 yrs FRM as well because if the market rate is always at lower level, you are paying more interest to the bank which will most likely happen to the majority of customers unless you think you can beat the bank on the market trend prediction, but I doubt. Plus, if unluckily, your 5yrs FRM renewal happens at the market high level, you are screwed for a whole 5yrs....too bad.
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