Will They?
Will they, won’t they?
TLDR: It doesn’t move the needle much even IF they do cut this Wednesday. But, every little helps. The drops (plural) are coming.
The Longer Read:
Tomorrow will be a big media day, regardless of the decision. Break it down today. Plan today for a smooth tomorrow. What does the Bank of Canada announcement mean for you?
Do you have a floating rate mortgage? Floating being an Adjustable Rate mortgage, or a Variable Rate mortgage.
FYI media calls both of these mortgages ‘variable’
Floating rate, aka ‘variable’ mortgages are directly impacted by BoC announcements.
Adjustable Rate
This is a floating rate mortgage. Your repayment changes.
Repayments change ~$15 for every $100K of initial mortgage loan amount
Example: $500K mortgage = ~$75 month change
IF rate drops, can you keep paying at your current repayment amount? (And paydown your mortgage faster – ask me for the maths if you’re interested in this)
Variable Rate
This is a floating rate mortgage. Repayment is static.
Repayment dollar amount stays the same. The amount being paid to interest and principal changes. Do you know your maths? What is being allocated to each – principal and interest.
Fixed Rate
The Bank of Canada announcements have no direct impact on your current mortgage repayment.
What now?
I hope tomorrow brings the news that Adjustable and Variable mortgage holders (and line of credit holders) have been waiting for. If not tomorrow, soon.
Remaining BoC Announcements - July 24th / September 4th / October 23rd / December 11th
What can you do in the meantime, in your control?
Renewal this year or next? Consider re-amortizing and/or lowering the mortgage loan amount
Payrise? Consider increasing your repayment
Tax refund / bonus / lottery win(!) – Consider a lump sum repayment
Debts? Consider consolidating them into your mortgage to better your monthly cashflow
Renewing? Hear someone talking about renewing? Signing the first offer from the incumbent mortgage lender is a mistake. Talk to me first.
