if you want to see an interesting mortgage market check out the Dutch market
The big 5 have built a beautiful oligopoly of good returns, high fees, and mediocre products.
I should have loaded up back in January when BNS hit it’s lowest point since 2009.
I think it is interesting, too. I’d guess why Americans seem to prefer locking in long-term rates has been successful marketing by the U.S. mortgage and banking industry over the last 10 years. I can’t count how many times I’ve seen or heard “take advantage of low rates” (google search it) in various forms regarding mortgage rates over the last decade. Maybe its just me but it is almost as if it is deeply ingrained into our culture through incessant advertising. If the US is good at anything, its marketing. Just a wild guess but I cant think of another reason why the US and Canada should differ so much.
Mortgages never stay on bank balance sheets. They are often delivered to the government, guaranteed, and then sold as securitized pools to a wide range of investors including those banks . I always assumed this process is what allows America to have such lenient financing. Also, due to this isn’t underwriting more strict on arm products in USA since they are portfolio loans? Don’t know, I’ve never used an arm
Maybe read the rest of the thread to come up with another reason…
Uhhh was this comment completely missed or ignored? Can’t just stick your head in the sand if you’re looking for an answer… If these numbers are correct, then /thread
Ignored since it provided data that sounds accurate (no idea if it is or not) and isn’t just baseless rambling.
We don’t take kindly to legit data around here.
^ it was ignored because it is irrelevant. you can just refi after 5 years so using the full term APR of an ARM is a useless comparison. the direct comparison is what canadians do which is effectively refi at the 5 year rate every 5 years.
there are many mortgage originators beyond the banks. any person with half a brain avoids the banks entirely when looking for a mortgage.
wow the spreads on a 25 year in Canada and the 30 year in US is insane. Must be due to the mean green GSE machines.
This thread is boring and I think Matt is going through maple syrup withdrawal.
gotta play the curve
http://www.businessinsider.com/us-treasury-yield-curve-evolution-1982-2014-2014-12
Just came across this thread… great stuff. It’s hard not to take a look at rates now after everything that has happened in the past 10 days. I currently am in a 30 year at 3.625 that I got about a year ago. Can get a new 30 year at 3.5 now, so not really worth it with a savings of only .125. However, a 5 year ARM is at 2.625, which would be about a $230 savings per month, netting me about $13.6k over the next 5 years. I know there is the risk of rates rising, but I just can’t see things going way up in the next 5 years. Hell, I think we have a better chance of a 30 year mortgage staying in the 4% neighborhood than going above 5% in the next 5 years. Worst case, in 5 years I can just re-finance again into a new 30 year. At that time, even if rates were at 5.5% the monthly payment would be pretty similar to where I am now.
The other dilema is whether to act now and try to lock in that 5/1 ARM at 2.625% or roll the dice and see if rates go even lower. Unfortunately, the spread between 30 year mortgage vs 10 year treasury seems to be widening (averaged between 1.4 and 1.6 in last 5 years, but is currently aroun 1.8), so there is no assurance that even if rates continue to drop the same will happen for mortgage rates. I doubt we will ever see a 2 handle on a 30 year mortgage, so trying to hold out and see if rates drop more may not be worth it.
15 year fixed or GTFO
^I don’t know why people prefer short terms to long ones.
If you want to turn a 30-year fixed into a 15-year fixed, then just pay 30% extra. But at least you have the flexibility to keep payments low during the lean months.
^ Agreed. I guess you do it if you don’t think you will have the self control to actually overpay. Still, I would rather the flexibility to lower my payment if I want, rather than be locked in. Sure I may pay a little more over the next 15 years, but the flexibility is way more important. The difference between a 15 and 30 for me is about $700 a month.
15 year will have a significantly lower interest rate, so a much lower “cost”.
For anyone debating the merits of a 15 yr vs. 30yr., do yourself a favor…create the loan amortization schedule and calc the total interest paid over the entire course of each loan. This can easily reveal hundreds of thousands in savings.
Do you really need to ask? Been living in a cave for the last decade?
I just buy with cash, US mortgage math is an atrocity. Can’t understand how people fall for that…oh wait I do know, they can’t do math!
By doing zero math whatsoever…
If you pay the minimum on both a 15 and 30 year, then yes, the 30-year will costs you a lot more. However, you’re also forgetting the opportunity cost of the savings.
Plus, if you get a 30-year note and pay it off in 15 years by paying 20% extra (or whatever the math comes out to), I imagine that your actual savings is very little.
I could whip out the old TI and do the math but…I’m not going to.