What mortgage would I take right now?
There are a lot of mortgage options out there. If your mortgage renews this spring what would you be considering when you are looking at terms and rates?
I like the idea of a 1 or 2 year fixed mortgage for people who aren't comfortable with a variable but want to be at a lender that has high penalties.
I would not suggest taking the 5 year fixed with a bank right now because their penalties are just too high & the 5 year fixed with a monoline lender with lower penalties will be much lower could be a good way to go.
The penalties are very important when we are going into a potential recession in the next 5 years (says the majority of economists currently). No one knows when it will happen but if you have a higher rate and high penalties when rates drop you will be stuck over-paying more interest to the bank with no opportunity to make a change without handing them an insane amount of money in a penalty (could be like $25k or higher depending on your mortgage size).
The variable is a good option if it is a well discounted rate (prime-0.95% or better) because of all the positive reasons we mentioned before but you have to be comfortable with it. If you are not comfortable then I don’t think it is a good option for you. But for clients who like variable this is a great option because it would allow you to automatically take advantage of any drop in rates over the next 5 years and have the potentital to lock in low if there is a big drop in the bond market.