North York Real Estate Blog

Fixed or Variable: The Mortgage Dilemma

Michael Pasternack - Friday, July 29, 2011
 If you ask two different people whether you should obtain a fixed or variable mortgage, you’ll likely get three different answers!  Everyone has a different opinion (and sometimes more than one opinion!) on the matter.
 
Being North York real estate agents, we are continually asked our “preference” on mortgages.  Well, here it is:  Generally, we prefer the variable (or “floating rate”) mortgage.  Research has shown that more often than not, you’ll save money with a variable.  Of course, if you’re not the gambling type, a fixed rate may be the way to go. With fixed rates at historic lows, rates likely have nowhere to go but up.  That being said, how long will it take for your variable rate (which, when obtained on a closed mortgage basis as of the date of this blog entry, is typically offered below prime) to be on par with the same fixed rate you can obtain today?  And by the time you hit that “par” rate, how much money will you have saved?  Probably a significant amount.  Take this example:  You require a $500,000 mortgage.  Lender A offers you either (a) a five-year variable closed mortgage at prime less 0.75% (variable closed mortgage), or (b) a five-year fixed rate of 3.75%.  As the prime rate is currently at 3.00%, your variable would be 2.25%. Assuming for the purposes of this example that the Bank of Canada raises rates three times per year at a rate of 0.25% on each occasion (and, of course, it could be more or less than 0.25%), it will take two years before your variable is on par with the fixed option that you could have obtained.  How much money will you have saved during that two year period?  
 
We’re not advocating for fixed or variable, as we are North York real estate agents, not mortgage brokers!  However, we are simply stating our preference.  One of us (Michael) is a practicing lawyer who took his mandatory (and some optional) real estate and land transactions courses in law school, and often recalls one of his professors repeatedly stating “You’ll save money with a variable rate”.  We still live by that statement, both personally and professionally.  We don’t know if you’re the gambling type who doesn’t get butterflies in the stomach every time rates rise, but if you are, we think a variable is the way to go.  
 
And remember, the lenders’ (banks’) posted rates are simply “posted”.  99% of the time, you can obtain better rates by negotiating.
 
We are well connected in the North York real estate market (as well as the Toronto and Thornhill real estate markets), and would be happy to put you in touch with some mortgage brokers who we feel are fantastic to work with and eager for your business (which translates into potentially great rates for you!).
 
If you’re looking for results or general advice, we are always happy to speak with you.  Call Lisa at 416-543-9408 or Michael at 416-786-6160, your North York real estate agents.  

Summer Market

Michael Pasternack - Friday, July 22, 2011

As most people are aware, the summer season generally brings with it a slow down of the North York real estate market. When we speak of “slow down”, we don’t mean a decline in prices or a general downturn in the market. What we are referring to is a decline in inventory due to typical summer activities. Vacations, weekends at the cottage and a more active lifestyle leaves little time for both potential home sellers to list their property and potential home buyers to spend the time looking for their new dream home. Inevitably, every summer we receive the same questions: Should we wait until fall to list? Should we wait until fall to buy?


Lets look at the question from both the buyer’s side and the seller’s side. It’s well-known that summer inventory is typically lower than both spring and fall. For the reasons outlined above, if I don’t really need to sell (or buy) in the summer, why spend my time during the hot hazy days of summer going through the listing or buying process? I can wait for fall to roll around when the kids are back in school and the weather begins to turn. While that may be true, summer sellers and buyers are known for one thing – they are in it to sell or buy. What we mean by that is as follows: There is a small (or maybe not so small!) percentage of sellers and buyers who are in the market to “test the waters”. For a seller, that means not really looking to sell unless he or she receives an extraordinary “out of this world” offer on their home. For a buyer, it’s going from house to house (or condo to condo) looking for that “spectacular deal” - the buyer may not really need (or want) to move, but will do so if he or she feels that they’ve found “a steal” The “testing of the waters” doesn’t happen as much in the summer. Not many sellers want to waste precious time during our short summers engaging in a listing process when they really aren’t interested in selling at a reasonable price, and not many buyers want to spend the sunny days driving from property to property. As a result, sellers who list in the summer, and buyers who are home hunting in the summer, are generally seriously in the market. Sellers are more likely to accept a reasonable price, and buyers are more likely to act reasonably and not simply waste a sellers time by viewing the property. As an added benefit for buyers, less competition means a higher probability that your reasonable offer will be accepted by the seller!

In a nutshell, if you are motivated to sell or buy in North York, the summer months may be the perfect time for you!

As always, if you’re looking for results or general advice, we are always happy to speak with you. Call Lisa at 416-543-9408 or Michael at 416-786-6160, your North York real estate agents.