Mortgage Dave

05/20/2025

FIXED VS. VARIABLE RATE MORTGAGE!

One of the most important decisions when choosing a mortgage is whether to lock in a Fixed interest rate or select a Variable (floating) rate. I wanted to give some detailed information on the difference between Fixed rates and Variable rate mortgages as I am getting a lot of questions on the subject lately.

By and large, Fixed mortgage rates follow the pattern of Canada Bond Yields, plus a spread, where bond yields are driven by economic factors such as unemployment, export and inflation. Variable rates are based on the Bank of Canada’s overnight lending rate which is set and reviewed by the Bank of Canada eight times a year.

With a Fixed rate mortgage, you “lock in” a predetermined interest rate for a set period of time (i.e., term). A Fixed mortgage rate can give some more comfort and security knowing exactly what the payments will be each month for the duration of the term. This makes financial planning and budgeting relatively easy.

Another consideration is that if you need to get out of a Fixed rate mortgage before the term is up, you may have to pay a higher penalty. The penalty is typically the greater of either 1) three months’ interest, or 2) the interest rate differential (the difference between your Fixed rate and the current market rate multiplied by the outstanding principal further multiplied by the remaining years of the term).

Historically, a Variable rate has been a better option by just comparing rates however, those rates can change as we saw in 2023. If you have a Variable rate mortgage and rates increase, more of your payment will be going towards interest rather than principal, if your payment isn’t adjusting accordingly as rates increase.

Another important consideration with Variable rate mortgages is that they generally have lower prepayment penalties than a Fixed rate mortgage should you decide to break your mortgage early.

Instead of trying to guess where rates are headed, consumers would do better to think about their own situation. They should evaluate their personal balance sheets and risk tolerance. The decision of whether to go short (Variable) or long (Fixed) will depend on the consumers’ tolerance for risk as well as their ability to withstand increases in mortgage payments.

You need to have a plan with a Variable rate mortgage. I recommend a professional mortgage review to determine your personal tolerance to rate increases and develop a strategy for managing your mortgage to reduce your overall cost of borrowing.

Variable vs Fixed Mortgage Rates: Features Compared
Fixed Rate:
· Locks your rate into place for a period of time called the term (usually 5
years).
· Rate is typically a bit higher, but provides for a stable, consistent
mortgage payment for years to come.
· If you break the mortgage, there is often a bigger penalty called an
Interest Rate Differential Penalty.
· It is not possible to switch a Fixed rate into a Variable rate without
breaking the mortgage.
Variable Rate:
· The rate floats or changes over time, with decisions from the Bank of
Canada.
· The rate is determined using a discount off of the Prime Rate (ex. Prime
minus .50%).
· Typically, the Variable rate is lower than Fixed, but can also float higher for
periods.
· If you break the mortgage, the penalty is only three months interest.
· You can lock the Variable rate into a Fixed rate at any time, without
breaking the mortgage.

The lower penalties and increased flexibility built into a Variable rate mortgage are a cornerstone of a Variable rate.
When looking at a Variable vs Fixed mortgage, it should be taken into account that, especially during the first 3 years of a Fixed rate mortgage, the penalty to break the mortgage can be extremely high.

As a mortgage broker for over 19 years, I have seen many individuals faced with massive prepayment penalties when breaking their mortgage for any number of reasons:
· Moving
· Refinancing to pull out equity
· Switching into a lower rate
· Family changes
· Many more…

While a detailed discussion of penalty details is beyond the scope of this article, the point is that most Variable rate mortgages will only ever charge 3 months interest penalty if you end up breaking the mortgage.

Determining which type of rate is most suitable for you is where I can assist. If you would like a no obligation mortgage review of your personal situation, please contact me at [email protected].

10/23/2024

Bank of Canada Slashes Interest Rates: What It Means for you.
The Bank of Canada (BoC) has made a significant move today by reducing its overnight interest rate by 50 basis points, bringing it down to 3.75%. This is the largest rate cut we've seen since the early pandemic days and marks the fourth consecutive reduction this year. This lowers the prime lending rate to 5.95%. The BoC's decision stems from a combination of slowing inflation, which dropped to 1.6% in September, and a cooling economy.
While inflation is now back at the Bank's 2% target, this rate cut aims to stimulate the economy, which has shown signs of sluggishness despite lower prices. Growth in key sectors like residential investment and exports remains promising, but challenges in the labor market, particularly among younger workers and newcomers, persist.
For Canadians with variable-rate mortgages, this cut is a welcome relief, translating to lower monthly payments and a greater share of payments going towards the mortgage principal. Homeowners looking to buy or approaching renewal might still face higher rates compared to previous years, but these cuts bring hope for some fixed rate reductions.
On the housing front, first-time buyers could see improved affordability as mortgage rates continue to trend down coupled with recent changes in the insured mortgage rules like allowing a 30-year amortization. However, the rate cuts alone won’t drastically change the housing landscape just yet—continued cuts in the coming months will be critical to see if this momentum can sustain.
The Bank of Canada hinted at more reductions on the horizon, but it emphasized that decisions will be made on a meeting-by-meeting basis. For now, Canadians can expect some much-needed financial relief, but as always, the outlook depends on how the economy evolves.
What’s Next?
The next rate announcement is scheduled for December 11, 2024. Until then, keep an eye on the market and be prepared for more reductions. If you have questions about how these changes affect your mortgage, feel free to reach out. I’m here to help you navigate this evolving landscape.
My business continues to grow by word of mouth. Please feel free to pass along my contact information to any friends, family or colleagues who have questions about their mortgage needs.

Dave Bruynesteyn

04/18/2023

A Reverse Mortgage is a way for homeowners 55 or older to turn a percentage of the value of their home into tax-free cash.
It’s a loan secured against the value of the home, but unlike a traditional home equity line of credit or a conventional mortgage it does not require monthly mortgage payments for as long as you live in your home.
You always maintain ownership and control of your home. A reverse mortgage will not affect any government benefits you may receive, such as Old Age Security (OAS), Canada Pension Plan (CPP), or Guaranteed Income Supplement (GIS).
You’ve worked hard to own your home. Now get your home working for you:
• Pay off Debts
• Renovate or make your home more accessible
• Help your children with a down payment
• Handle unexpected expenses
• Improve your day-to-day standard of living
• Make a special trip or purchase
Saving up an adequate down payment is among the hardest obstacles for young homebuyers – and more difficult now then ever before because of rising home prices. An increasing amount of Canadians 55+ are gifting their children money for a down payment. In fact, according to a report from CIBC, 30% of Canadians received financial help from their families to purchase a home in 2020. This is significantly higher than the 7% of Canadians in 2000.
I have seen this trend of late with parents who live in a house with a lot of equity. They want to see their children benefit from their inheritance while they are still around.
As an example, I have a client we will call Kate. Kate has two children who are in entry level homes. Kate took a reverse mortgage for $643,500.00 against the value of her home appraised at $2,000,000. She paid off her small mortgage of $243,500.00 and gifted each child $200,000.00 to upgrade their homes. Both children bought newer, better homes with suites. The plan is Kate will sell in a few years and then live with each of her children for 6 months of the year.
Even with a conservative 3% appreciation in the housing market, the parents will still have more equity in their home 10 years from now than they have today.
A Reverse Mortgage is a great way to access the equity in your home. Call me for more information.

04/12/2023

Happy April, I hope you are enjoying the longer days and warmer weather.
So, what happened with the Prime rate today?
As expected, The Bank of Canada left its overnight lending interest rate at 4.5% for now, leaving that key rate untouched for a second consecutive month as it continues a careful pivot away from its rate-hiking trajectory of the past year.
The hold, which was widely expected by economists, comes after eight consecutive increases saw the key rate rise by 4.25% since March of last year. The central bank undertook one of the fastest rate tightening cycles in its history in hopes of tamping down rampant inflation.
Canada’s annual inflation rate has cooled from highs of 8.1% in mid-2022 to 5.2% as of February. Shorter-term measures of core inflation — a metric the Bank follows closely as it strips out more volatile price pressures — are also heading in the right direction as of late.
The Bank of Canada said in a statement accompanying the rate decision on Wednesday that the latest economic data is in line with its forecast calling for inflation to return to around three per cent by mid-2023 and then decline more gradually to the 2% target by the end of 2024.
The central bank added there are risks to the inflation outlook that could drive price pressures higher again and warrant another interest rate increase down the line.
The country’s “very tight” labour market and surprisingly strong” employment growth is a significant source of uncertainty in its inflation forecast, policymakers wrote.
In addition, global factors such as Russia’s war in Ukraine and rebounding economic growth in China are risks that could drive inflation higher still.
Things are looking brighter; fixed interest rates are down and the Prime rate has stabilized for now. This, coupled with the fact we are in a Spring market should see activity increase significantly.
My business continues to grow by word of mouth, if you have any friends, colleagues, or family that may benefit from my services, it would be great if you could make an introduction.
As always, I am available to talk about your specific situation at your convenience. Feel free to call or email.

Dave Bruynesteyn

03/08/2023

Happy March! This weekend we spring forward one hour and we get to enjoy some longer days. So, what did the Bank of Canada do today?

The Bank of Canada held its policy interest rate steady for the first time in a year. As a result, the benchmark interest rate remains at 4.50% and Prime at 6.70%.

The Bank holding rates steady was a great relief to all the variable interest rate clients out there who have seen eight straight interest rate increases since the beginning of 2022. The Bank is also continuing its policy of quantitative tightening. Canada is the first bank to pause raising interest rates among the worlds major central banks.

The fourth quarter of last year saw economic growth slow to a halt. The increase in interest rates slowed housing activity significantly. "Inflation eased to 5.9% in January, reflecting lower price increases for energy, durable goods and some services. Price increases for food and shelter remain high, causing continued hardship for Canadians.”

The Bank of Canada sees the economy reacting as it forecast early in the year. "Overall, the latest data remains in line with the Bank's expectation that inflation will come down to around 3% in the middle of this year," policymakers said.

The Bank of Canada will continue to monitor the economy going forward to maintain its goal of 2% inflation. Most economists think the Bank of Canada will hold the overnight lending rate at 4.5% for the rest of the year.
Fixed rates continue to be around 5% for 5 year term these days and we need some more stability in the world before I expect we will see any major reductions

If you have a Fixed rate mortgage renewing in the near future make sure you get a hold of me asap so we can lock in a rate in case they go up. If you are currently in a Variable rate mortgage and are having issues keeping up with payments, we may have options while we wait for interest rate relief.

If you are 55 years old or more, or getting close to retirement, a reverse mortgage is a good option in some situations. Feel free to contact me to discuss the options available to you.
Hopefully we have reached the plateau in rising prime rates and things will stabilize this year so we see some reductions in the rate next year. Have a great spring.

12/19/2022

Starting in January 2023, non-Canadians will be banned from buying homes across Canada, through the Prohibition on the Purchase of Residential Property by Non-Canadians Act. This Act prohibits non-citizens and non-permanent residents from purchasing residential property in Canada for two years. The....

09/28/2022

The Bank of Canada Hiked Rates again and they aren’t finished yet!
The Central Bank last raised its target for the overnight policy rate by 75 basis points to 3.25% and signaled that the policy rate would rise further. The Bank is also continuing its policy of quantitative tightening, reducing its holdings of Government of Canada bonds, which puts additional pressure on longer-term interest rates.
The implications of the Bank of Canada action are considerable for the housing market. The prime rate has moved to 5.45%, increasing the variable mortgage interest rate another 75 basis points, which will take the qualifying rate to roughly 7%.
Another implication of the policy rate hike is the prospect of fixed-payment variable-rate mortgages taken at the meagre yields of 2021 and 2022, hitting their trigger rate. There is a good deal of uncertainty around how many these will be, as the loan terms vary from lender to lender, but it is another factor that will overhang the economy next year.
I maintain the view that the economy will slow considerably in the second half of this year and through much of 2023. The Bank of Canada will hold the target policy rate at its ultimate high point, at least one or two more hikes away, through much of 2023. A return to the target 2% inflation will not occur until 2024 at the earliest.
What does this mean for you?
If you are in a fixed rate mortgage there are no changes to your mortgage rate or payment.
If you have a Variable Rate mortgage (First National and Scotiabank) your payment will increase with the increase in prime. For every $100,000 of mortgage that you have, you can expect your payments to rise by $42 assuming a 30-year amortization and a rate of prime – 1%.
If you have a fixed payment Variable Rate mortgage, you may be hitting your trigger rate during this rate hike and you will need to increase your monthly payment to align with your original amortization. You could also consider a lump sum payment to reduce your principle.
Trigger Rate and Trigger Points
There has been plenty of fear and misinformation regarding the Trigger Rate circulating recently. Most of my clients have a variable rate mortgage and are fine but a few have a fixed payment variable rate mortgage with TD. Lenders with the fixed payment system have what we call a Trigger Point. Let’s quickly review both terms
Trigger Rate
As interest rates on fixed payment variable rate mortgages increase and the payments don’t change, there will be a point where the original principal and interest payments no longer cover the interest charged on the mortgage or term portion. This happens when your rate has exceeded the trigger rate.
If the variable rate increases beyond the Trigger Rate, the mortgage will have an increasing balance unless the regular payment is increased enough to cover the outstanding interest.
Trigger Point
For a Conventional fixed payment variable rate mortgage, the Trigger Point is when the principal amount plus interest owing exceeds 80% of fair market value of the property as Determined by TD.
For an insured fixed payment Variable rate mortgage, the Trigger Point is when the principal amount plus interest owing exceeds 105% of the original principal amount of the mortgage loan.
What happens once a customer reaches the Trigger Point and how are they notified?
TD will notify the customer by letter and inform them of how much the principal amount exceeds the Trigger Point (the excess amount). Once notified, you have 30 days to make a lump sum payment, increase your payments or convert to a fixed rate mortgage.
If no action is taken by the customer, then the mortgage is in default and it would be sent to collections.
The Bank of Canada has been very aggressive in raising interest rates which has put a lot of stress on consumers. This increase is expected to be short term and all experts are predicting rates coming down later in 2023. Everyone’s situation is different so if you have any questions about your personal situation, please reach out to me, cheers

07/21/2022

The homebuyer protection period, the first of its kind in Canada, goes into effect on Jan. 1, 2023.

04/14/2022

Happy Wednesday.

Today, in its third scheduled policy decision of 2022, the Bank of Canada took direct aim at inflation by increasing its overnight benchmark rate to 1% from 0.50%. As a result, the Bank Rate rises to 1.25% from 0.75% and the Prime rate will go from 2.70% to 3.20%.

This decision was not a surprise. Deputy Bank of Canada Governor Sharon Kozicki told an audience of central bankers in San Francisco last month that the Bank was “prepared to act forcefully” to combat inflation and provided a strong hint that as much as a half a percentage point increase was on its way in April. Even so, this is strong medicine and marks the first time in 22 years that the overnight rate moved up by 50 basis points in one fell swoop.

In rationalizing these moves, the Bank singled out the invasion of Ukraine by Russia as a “new economic uncertainty” that is causing supply disruptions, exacerbating ongoing supply constraints and “weighing on activity.”

The Bank forecasts that Canada’s economy will grow by 4.25% this year before slowing to 3.25% in 2023 and 2.25% in 2024. Inflation is currently at 5.7%, well above the Central Banks target of 2%. So will we see the prime rate continue to rise?

The last word on this topic goes to the Bank’s Governing Council: “With the economy moving into excess demand and inflation persisting well above target…interest rates will need to rise further.” The timing and pace of further increases in the policy rate will be guided by the Bank’s ongoing assessment of the economy and its commitment to achieving its 2% inflation target.

What this means is that we are in an upward rate market until the uncertainty in the world settles down (war in Ukraine) and inflation comes in line. The bond market has risen quickly with this uncertainty so fixed rates have risen as well.

What this means is if you are in a variable rate you may consider locking in and if you are looking to buy or refinance remember I can hold rates for 4 months so call me well before you act so we can grab a rate hold for you.

Every situation is unique so feel free to contact me to discuss your particular situation.

Make it a great day!

Dave Bruynesteyn

04/12/2022

Are you self-employed? Do you have enough claimed income to qualify for the mortgage you need? Read my latest blog post for more info.

  Are you self employed? Here are some important tips for self employed individuals when it comes to reporting income, your taxes and your mortgage […]

03/17/2022

Are you going through a separation or divorce?
Are you trying to figure out how to buy your ex out of your home?
Going through a divorce is stressful and all consuming at times. Trying to sort out all the details and figuring out how to keep your home and pay off your ex is stressful.
I have been a mortgage broker for over 17 years and I have also been through a divorce. Let me take your stress away and help you find a solution.
You might not be aware that there are mortgage products designed to allow you to refinance up to 95% of your property in order to buyout your ex-spouse. Normally you can only refinance to 80% of the value of the property so this program can be very beneficial.
To qualify for this program, you must have good credit and you must be able to afford the mortgage on your income alone. Please note the equalization payment can only go to the departing spouse and must be specified on the agreement.
In order to qualify you will need to provide the lender will a copy of a fully signed separation agreement.
Consolidation of matrimonial debts is permitted provided they are listed as ‘joint’ on the credit bureau and as a payout on the separation agreement.
Both you and your ex-spouse or partner must currently be on title to the property.
The maximum loan to value ratio is the lesser of 95% of current home value or remaining mortgage plus equity required to buy out other owners and pay off joint obligations, if applicable. The property in question must be the primary owner-occupied residence.
With this type of a mortgage a full appraisal of the property is necessary.
If you have any questions about the Spousal Buyout program or any other mortgage questions, please don’t hesitate to contact me. I have been there and I am here to help! Call me at (604) 315-3283 or email [email protected].

02/14/2022

Fixed Rate vs. Variable Rate

I wanted to give you some detailed information on the difference between fixed rates and variable rate mortgages as I am getting a lot of questions on the subject.

Amid soaring inflation, the Bank of Canada has hinted that the first interest rate hike could take place as soon as the March 2, 22 monetary review. Analysts had previously expected rates to begin rising from record lows in the second half of 2022.

The first question you should ask yourself is why you chose a variable rate mortgage in the first place. Was it because it had a lower rate than a fixed term mortgage or did you have a plan to take advantage of that lower interest rate?

Historically, a variable rate has been a better option by just comparing rates but those rates can change. Potentially and depending on if you have a variable rate mortgage, more of your payment will be going toward interest rather than principal if your payment isn’t adjusting accordingly as rates increase. Another important consideration with variable rate mortgages is that they have lower prepayment penalties generally than a fixed rate mortgage should you decide to break your mortgage early. Statistics support that this happens more often than not.

Instead of trying to guess where rates are headed, consumers would do better to think about their own situation. They should evaluate their personal balance sheets and risk tolerance. The decision of whether to go short (variable) or long (fixed) will depend on the consumers’ tolerance for risk as well as their ability to withstand increases in mortgage payments.

For some currently in a variable rate mortgage, it could take up to 10 rate increases of 0.25% to not save money with your variable rate mortgage as the rate generally only increase by 0.25% at a time.

You need a plan with a variable rate mortgage. The best thing is to do a review with me to determine your personal tolerance to rate increases and determine a strategy for managing your mortgage to reduce your overall cost of borrowing.

Something to consider about locking in your mortgage is that not all lenders are going to offer you the very best fixed rates. You are also hedging your bet that at some point your fixed rate is going to be lower than a variable rate mortgage.

No one can predict where rates are headed. Even the experts get it wrong. Your decision to lock-in to a fixed rate mortgage should not be based on what you read in the media.
If you are at your maximum purchasing power or you’re a worrywart, lock-in, forget about it, and enjoy life.

Variable vs Fixed Mortgage Rates: Features Compared

Fixed Rate:
· Locks your rate into place for a period of time called the term (usually 5 years).
· Rate is typically a bit higher, but provides for a stable, consistent mortgage payment for years to come.
· If you break the mortgage, there is often a bigger penalty called an Interest Rate Differential Penalty.
· It is not possible to switch a fixed rate into a variable rate without breaking the mortgage.
Variable Rate:
· The rate floats or changes over time, with decisions from the Bank of Canada.
· The rate is determined using a discount off of the Prime Rate (ex. Prime minus .50%).
· Typically, the variable rate is lower than fixed, but can also float higher for periods.
· If you break the mortgage, the penalty is typically far lower.
· You can lock the variable rate into a fixed rate at any time, without breaking the mortgage.

The lower penalties and increased flexibility built into a variable rate mortgage are a cornerstone of a variable rate.

When looking at a variable vs fixed mortgage, it should be taken into account that, especially during the first 3 years of a fixed rate mortgage, the penalty to break the mortgage can be extremely high.

As a mortgage broker for over 15 years, I have seen many individuals faced with massive ‘interest rate differential penalties’, when breaking their mortgage for any number of reasons:
· Moving
· Refinancing to pull out equity
· Switching into a lower rate
· Family changes
· Many more…

While a detailed discussion of penalty details is beyond the scope of this article, the point is that most variable rate mortgages (the ones without terrible fine print) will only ever charge 3 months interest penalty if you end up breaking the mortgage. The 3 month interest penalty is far lower – often to the tune of thousands of dollars lower than comparable fixed rate mortgage penalties.
Five years, the typical mortgage term, is a long time, and it can be difficult to tell exactly the way things will play out further down the road. So an important financial planning strategy is to remain flexible and agile to help accommodate changes.
I also contend that the lower penalty of a variable rate, offsets much of the risk associated with a fixed vs variable mortgage.


Timing a Fixed Rate Lock-In?
The points mentioned so far mainly apply to the period where you are in a variable rate.
One of the fundamental benefits of a variable rate is the ability to lock into a fixed rate.

First, it is helpful to understand the difference between fixed and variable rate pricing. The key to understanding fixed rates, is that they are bond market driven (bonds being Canadian national debt, in the form of a tradable debt instrument, and traded on international markets). In other words, the central bank does not increase or decrease fixed rates, the bond traders, and their perception of where central bank/variable rates will end up in 6 months – 1 year down the road, will in a highly correlated way, price the fixed rate sooner than later. In other words, the pricing of the fixed rate is an anticipation of where the variable rate will go in the short – medium term.
The timing to lock in to a fixed may be more difficult to anticipate in 2022, and the main advice currently, if you decide on a variable rate is to plan on holding the rate even as variable rates increase throughout 2022 and 2023, and NOT locking into a fixed any time soon. With such significant discounts in variable rates currently, as of January 2022 , there is a lot of runway for variable to catch up to fixed.

Accordingly, there is substantial savings and ‘risk mitigation’ (as discussed above) that may be had until the point where your variable rate, catches up to the fixed rate, and even then – you have not yet lost. Indeed, if you save with your variable rate for the first half of your term, then rates will need to go up enough in the second half of the term, to ‘pay back’ those savings to truly break even. This would require perhaps a 2.5% – 3% increase in the variable rate in the next 5 years.

If you would like a no obligation review for your personal situation please let me know. We can compare your current variable rate mortgage to a fixed term option