Wednesday, July 11, 2007

Making Sense of Confusion - Questions about mortgage interest rates and the differences between prime, bank prime and mortgage rates



I received an email today with some great questions about mortgage interest rates and the differences between prime, bank prime and mortgage rates. The questions and then my answers are below.


Hello Mark,

I find your study of the history of our Canadian interest rates interesting and I appreciate the information you have on your web site. (
the graphs are here)

Hopefully, you can answer two questions for me.

How do rates vary for mortgages over 15 years amortization with 20 years or 25 years. Are the rates higher, due to the loss of interest acquired by the lender over 15 year period.

When a prime rate is posted; is this just for the banks best business customers? How much difference should one expect if it is a first mortgage (therefore no major assets) and the borrower has no set income (example: works on commission, or is an artist)

I will look foreward to hearing from you.

F.

This was my email back to this person with answers to these questions.






Hello F.


Thank you for your email.

Interest rates on mortgages are the same regardless of the
amortization. Thus, shorter is better for you, longer is much better for the
bank!

Prime can be confusing. There is Bank of Canada Prime rate, which today is 4.75% The bank prime, the rate banks charge to their best customers is about 1.5% higher, RBC prime rate today is 6.25%


See RBC rates here:
http://www.royalbank.ca/rates/prime.html


TD-Canada Trust prime rates here:
http://www.tdcanadatrust.com/lending/index.jsp

Mortgage rates are set based upon the bank prime rate and bank forecasting, specials they may be offering and many other variables. Banks will base their rate upon your situation, self employed may pay slightly higher rates than a salary employee, but every situation is different. I am self employed, but have been for 20 years, so I receive same rates as a banks "A" people, this is also due to the fact that my credit rating is very high.

See the current TD-Canada Trust mortgage rates at this page:
http://www.tdcanadatrust.com/mortgages/numbers.jsp


See the RBC rates here and note the "special offers":
http://www.rbcroyalbank.com/products/

mortgages/view_rates.html

Thank you,
Mark

Read more about Mortgage Interest Rates

Toronto Real Estate Board (TREB) Average Prices and Graph
For more information please contact A. Mark Argentino

A. Mark Argentino, Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc., Brokerage
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1

BUS. 905-828-3434
FAX. 905-828-2829
E-MAIL:
mark@mississauga4sale.com
Website:
Mississauga4Sale.com

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