How To Choose A Mortgage In 2021

Okay, so 2020 smacked us upside the head. It surprised everyone, and it changed the rules when it comes to how to choose a mortgage in 2021 and beyond. The conversation around variable vs. fixed mortgages has changed significantly as has our opinion on choosing a mortgage.

In this video Nolan Matthias of Mortgage360 discusses his seven rules to choose a mortgage in 2021.

Today we’re going to give you some universal rules for picking a mortgage type and term in 2021, and at the end of the video I’ll give you the mortgage I would pick for myself if I was buying a new property this year.

But First, If you want the most honest and transparent mortgage information in Canada, Do me that favour and click the subscribe button, like this video, and if you’re in the industry I highly recommend you click the bell icon so you are the first to know, and don’t forget about our race to 10,000 subscribers, where we will pay one lucky subscribers mortgage or rent payment. All you have to do is subscribe to enter.

So rates are at an all time low, they are 1.5% lower than last year, so there’s never been a better time to get a five year fixed right? Well, think again. Because 2020 changed all the rules for selecting a mortgage.

Okay, so the question is do we want a fixed rate or a variable rate. Well that leads us to rule #1.

1. Always choose the mortgage with the most flexibility because 2020 proved we just can’t predict the future. What does it mean to have flexibility - well you want to choose the mortgage with the lowest penalty which is almost always going to be a variable or a short term one or two year mortgage. You also want to make sure you have the ability to switch lenders for better deals, and believe me there are going to be better deals available in the future. Being able to change things up is the name of the game in 2021.
2. For rentals always choose a variable rate. Why?
1. Because it is an investment so we can afford to be a little bit more aggressive with the mortgage we choose.
2. Because the penalties are way cheaper. And when we make an investment we want to make sure that f we want to or need to liquidate it we can do so without giving a whole bunch of money to the bank.
3. Rule number three is that we no longer want to pick the mortgage with just the lowest rate, we want to pick the mortgage that has the best balance between flexibility and a great rate. This means no more 5-year fixed mortgages, but it also means making sure your variable rate mortgage isn’t one of the discount variety. That leads us to rule #4
4. Stay away from “discount” or “no frills” mortgages, they often have little surprises like restocking fees that make them more expensive in the long run and also limit your options. If you google lowest rate mortgage on the internet, it is almost certainly going to be a discount option. The savings is going to be about a cup of coffee a week, but it will limit you from saving thousands down the road.
5. Always consult a knowledgable broker. Things like how penalties are calculated and restrictions are hard to pick out of a mortgage document. For example, one lender in the industry charges a three month interest penalty at prime rather than at the rate that the client is actually paying on their variable rate mortgages. This can mean thousands of dollars more in penalty costs, but this isn’t something the average consumer is going to pick out of 15 pages of fine print.
6. If you don’t take my advice and do decide to get a fixed rate mortgage, make sure it isn’t with a bank. You want to get it from a company that specializes in mortgages and has low payout penalty calculations. Again you are doing this so that if rates go down even further you have the option to refinance and lower your rate.
7. Review your mortgage options like your stock portfolio. Check in on the market quarterly and if it appears that rates have gone down more that 0.5%, check in with your broker to see if you can save money by refinancing.

As for what mortgage I would choose. In 2021 I would choose a variable rate. WIth the Bank of Canada advising that rates will likely go up in 2023 I wouldn’t want a 5 year fixed and risk having to renew into higher rates. No, I would choose a variable and consider locking in when rates do start to go up so that I can extend my low rate runway. I mad a video on that that I will link up here.

So in conclusion, 2021 is the year of the variable rate mortgage. Don’t be a sucker who pays a premium for the perception of the security of a five year fixed only to get stuck renewing into a way higher rate 5 years down the road.

And if you found this video helpful Subscribe, like, notification, and don’t forget about our race to 10,000 subscribers.

[dy]

Your channel is a gold mine. Thank you!

[NewLife-Ronita]

It would be great to see a video like this for 2022 😁 thank you for the info.

We are ready to renew in the next month and seeing the amount of incentive from my "friends: at the big banks to sign a 5 year fixed has me raising an eyebrow at their motives

[themillersbuiltupontherock]

All your videos have been exceptionally helpful.

[kilroy]

Can you please do a video on Beacon Score Id like to learn more about it and not alot of info out there

[sheldonpetrie]

My mortgage is up for renewal in July and I am definitely doing to consider this strategy

[lightninggaming]

Great content. My question is how do you shop around for pre approval ? As they say, it lowers your Credit score. How we can shop around without affecting the Credit score? 2023

[zohahs]

Nice channel, have you done any vides on HELOC? please do one if not trying to understand this one properly many thanks for sharing your knowledge.

[datrmon]

What is your opinion of Variable mortgages from Tangerine and Simpli Financials?

[stevek]

Thanks Nolan.
TD bank called me today and said they are sending a request downtown to see if they will approve a 1.45% variable rate 5 year closed.
I’m thinking perhaps I should have mentioned the 3 year variable rate because if rates change for the worst rather me in control in 3 years has opposed to 5 years.
Thanks for replying back very much appreciated.

[gwendolynwong]

please send me the link for the class that you offer

[AaDd-xpbw]

I am worried about inflation and hence raising rates. Do you still recommend Variable during potentially high-inflationary period?

[Msal]

Thanks. Why if we want to go with 5y fixed should go with Monoline?
What is the main difference between main bank and Monoline for fix rate?

[nofavors]

Aren't readvanceable mortgages expensive - have high interest rate - as compared to non readvanceable one's? And what are the benefits of a readvanceable mortgage if anyone can just use home equity if they have it whenever they need it by contacting a bank or other lenders that specialize in helocs?

[mhacky]

Nolan, brand new subscriber here....your thoughts about EQ in comparison to Scotia in terms of renewal/switching and financing.

[royleyvalencia]

Hi Nolan, what banks do you think are best for newcomers in Canada? We'll be arriving there soon and I'm educating myself everyday I can . Thanks so much for your videos are greatly useful

[stevek]

Hi Nolan!
Two Quick questions I’m with TD bank i have a renewal coming up this Thursday January 28 2021.
Actually renewal isn’t until May 28 2021, but I was advised that TD will lock me into a new rate 120 days before.
My question they are offering me 1.49% variable closed 5 years is this a good offer? Or a 1.81% closed for 5 years? Both options with flexibility.
I mentioned to the bank I wanted to get some advice from a mortgage broker but I was told it would be fine however if I used a mortgage broker I wouldn’t be able to get new rate right away I would have to wait until May 28th 2021.

[error]

Thanks for all the info Nolan! Btw what's the better lender/option - HSBC for 0.99% or MCAP for 1.25%? (both 5-year variable)

[bulletbeatboxer]

I don't understand the logic where if rates are going to go up you want variable? Doesn't that mean you're at risk of paying a (potentially ridiculous) interest rate down the line -- and if you + the BOC say it's going to go up? I understand the cost savings in the meantime until they go up -- but if you know it's going to go up wouldn't you want a locked rate? I know you've talked about this a billion times & I apologize but you've been promoting variable rates ("because they're low and going to stay low!") now it's going to go up and your tune hasn't changed?

[jordanmcmillin]

Hey man! Awesome vids!! Question: what's a good lender/bank to approach when seeking a mortgage with self-employed income? Thanks for your time!

[pradipgurung]

How can I check my mortgage amount cause I am first time house buyer!