Home Mortgage Rates

Term Rate
Prime 2.75%
Variable 2.05%
1 Year 2.54%
3 Year 2.90%
4 Year 3.79%
5 Year 3.69%
10 Year 5.35%

Qualifying Rate

Aug 31 5.39%

Current Inflation

July 1.8%

5 Year Bond Yield

Aug 31 2.04%

 

Special conditions apply
Mortgage Rates subject to change.

 

Frozen VRM (variable rate mortgage)

An excellent way to force an increased payment while protecting yourself from raising interest rates is the frozen mortgage payment available for variable rate mortgages. This option is hard to find but a good broker will know where to look. Let’s take a look at today’s (Jan 15, 2010) frozen payment:

  • 2.05% Current VRM rate at Prime (2.25%) minus 0.20%
  • 3.89% Current frozen payment

Using a $300,000 mortgage and 25 year amortization, the following happens:

  • Current VRM payment is $1,277.60 and it floating at Prime minus 0.20%
  • Current frozen payment is $1,560.22

With a frozen payment, the difference in payment is taken off your principle balance. In this calculation, the amount $282.62 is coming off your principle every month. When the Prime rate increases (and it will eventually), that spread decreases. When the interest rate exceeds your frozen payment you are protected but are now paying less of the principle per month. Paying less per month obviously isn’t a good thing but this option is here for your protection. When the interest rate increases to this point, I suggest putting aside month to dump in the principle annually or requesting a monthly payment increase. Of course you would only do this if your budget permits such action. In the event interest rates skyrocket, you will receive a warning call from your lender that your payment will have to increase otherwise your amortization will automatically increase.