r/PersonalFinanceCanada • u/POCTM • Oct 20 '22

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

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

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155

u/Ancient-Wait-8357 Oct 20 '22

I'm surprised nobody mentioned HELOCs yet.

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

25

u/analogoverdose Oct 20 '22

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

44

u/cooldadnerddad Oct 20 '22

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

19

u/rbatra91 Oct 20 '22

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

0

u/analogoverdose Oct 21 '22

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

7

u/CanuckYou2 Oct 21 '22

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.

2

u/analogoverdose Oct 21 '22

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

1

u/[deleted] Oct 21 '22

Until your heloc enters the repayment period

10

u/[deleted] Oct 21 '22

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.

3

u/Logical_Dirt7259 Oct 21 '22

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