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My contractor buddy dropped a warning about variable rate mortgages last week
I was chatting with my friend Mike who does renovations in Toronto and he told me he's seen three clients in the last two months get caught off guard by their mortgage payments jumping way more than expected. He said one couple bought a semi in Scarborough last year with a variable rate and their monthly payment went up almost $900 in twelve months. Mike told me the banks were really pushing these variable products even though the math was shaky from the start. He pointed out that a lot of people didn't budget for rates climbing over 5% because they trusted the low rate promises too much. Now I'm looking at my own renewal coming up in June and I'm honestly second guessing what I locked in before. Has anyone else had a similar talk with a tradesperson or real estate person that made you question your financing choices?
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beth_ward8023d ago
Really curious what your buddy Mike saw in the clients budgets that tipped him off they were in trouble. Did he notice they had no wiggle room in their monthly spending or was it more about them skipping stuff like maintenance and repairs? Because I feel like a contractor would spot that kind of thing right away if people are cutting corners to keep up with their mortgage.
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Hear your buddy loud and clear because my cousin works at a bank and she told me the exact same thing about those variable rates. She said the banks were basically betting that rates would stay low forever and they sold that dream hard to everyone who walked in the door. People really believed the whole "rates can't go up that much" line and now they're stuck with payments that jumped like crazy. The thing is the fine print on those contracts lets the bank adjust your payment anytime they want and most people never read that part. Your buddy Mike has a good point about trusting the math because if you didn't plan for rates to hit 6 or 7 percent you were living on borrowed time. Locking in now might hurt a little short term but at least you know what you're paying every month instead of guessing.
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