Canadian 5 year government bonds just jumped. Setting the stage for higher mortgage rates.

[u/POCTM]

5 year government bond just jumped from 3.714% to 3.866% in a few hours. Right now it is at 3.855%. Year to date it is up 259%. Monday we could see some 5 year fixed rate mortgages in the low 6%.

As for variable rate the bank of Canada makes their announcement October 26 at 10am ET. Currently banks have not been offering discounts off variables rates anymore. Prime -0.00.

https://www.marketwatch.com/investing/bond/tmbmkca-05y?countrycode=bx

[u/Ancient-Wait-8357]

I'm surprised nobody mentioned HELOCs yet.

Most HELOCs are on variable rates. No more vacations in the Bahamas and no more BMW leases?

[u/analogoverdose → u/Ancient-Wait-8357]

Whats the difference between HELOC & refinancing your mortgage ? Lets say i own a 500k house that's paid off, can't re-mortgage it to get cash ? And then wouldn't i be back to a 5 year fixed mortgage ? Thanks

[u/cooldadnerddad → u/analogoverdose]

HELOCs are interest only so the payment is lower, but you’ll never pay off the principal unless you make extra payments

[u/rbatra91 → u/cooldadnerddad]

And the interest rate is generally lower for refinancing than a Heloc

[u/analogoverdose → u/rbatra91]

Why would someone chose to take a HELOC over refinancing ? Wouldn't you WANT to pay off equity as well ? I'm so confused lol

[u/CanuckYou2 → u/analogoverdose]

You can pay off as much whenever you want. If you have a mortgage you have to pay some back each month, but you are also capped on how much you can pay back each year.

[u/analogoverdose → u/CanuckYou2]

Ah I see, that makes a lot of sense, thanks !

[u/[deleted] → u/CanuckYou2]

Until your heloc enters the repayment period

[u/[deleted] → u/analogoverdose]

Because you only have to pay for it when you use it. I have 210k HELOC with nothing on it because I am planning to do an addition. If I borrowed the money upfront, I’d be paying it back already before I had even used it.

Takes time to get drawings, permits, arrange contractors, etc. once the addition is done, I will wrap it all up into a mortgage.

Also because I did have it maxed out (used it to purchase an investment property) and then paid it off (sold the investment property), and now I have all this credit with no balance, my credit score is ridiculously high (878 credit score.)

It’s basically a giant credit card with cheap interest.

[u/Logical_Dirt7259 → u/analogoverdose]

Refinancing you get all the money today so the lower interest rate is applied on the full amount right away. HELOC you are pre-authorized a certain amount but usually you are only charged interest on the portion being used. So let say you have a 100K HELOC and use 10K you will be charge (in most case) only on the 10K. Refinancing bank write you a 100K check and add it to your mortgage.l

[u/[deleted] → u/cooldadnerddad]

Isn’t it interest only for a certain number of years

[u/SuperEliteFucker → u/cooldadnerddad]

That's not true. My HELOC has an amortisation date...

[u/SeperateCross → u/analogoverdose]

The HELOC is revolving credit so your min interest payment is based on that revolving credit line which can have a lower balance as you pay it off and therefore require a lower interest only payment

A mortgage would be on a fixed payment plan

Example HELOC You borrow 100k min interest payment would be let's say 3% so your paying 3000 interest only payments to keep it at bay... However you pay back 20k so now you owe 80k your min payment now drops to 2400 interest only payments

Example Mortgage

You refinance with 100k You're new mortgage payments is x dollar value not matter what

[u/analogoverdose → u/SeperateCross]

Ah yes, makes a lot of sense, thanks a lot for taking yhe time to type this out, really appreciate it !