they determine – and how do you shop around for them that's starting right now.

– Welcome to Homebuyer's School

brought to you by Brookfield Residential.

– Hi everyone I'mk Karl, and welcome to another Homebuyer's School video,

a channel where you get the latest

strategies tactics and tips from home buying experts, and remember if this is

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experts – hit the subscription button below, hit the little notification bell

so you don't miss anything. So today I'm joined by Mujtaba Syed,

mortgage specialist with the Bank of Montreal – and the question we're going

to answer today is mortgage rates in 2019. So I guess—well first of all,

what do mortgage rates mean? What are mortgage rates?

– So the mortgage rate means—is technically an annual percentage we call

an APR, which is when you borrow money to buy a home for example, you're

borrowing it from the bank and then you're returning it—and there's a cost for

that service so that's why I kind of look at interest rate is that this is the cost

for the service provided which is the interest rate that they lend you

their money or money in general, and then you just pay that back and it's based on

an annual rate, and is paid—it could be paid monthly, semi monthly, bi-weekly,

weekly depending on how you want to set it up.

– So where do I go to find the most current mortgage rate?

– You can go onto your bank's website. You can go onto your lenders website.

You could do a quick google search. Finding rates are not difficult,

The only thing I would really stress is go to a reputable

source to find interest rates. Find it from a reputable lender. Sometimes you

see a really little rate and then you get enticed by it and you realize that

it's an insurance company or it's something that's a financial company

that is not considered to be a bank. You want to be able to see where those rates

are coming from, what kind of terms and conditions are attached to that rate.

You might get a lower rate today but after the five-year term when your term comes

up, you might not be able to renew at the same rate or they might give you a

higher rate, you might not be able to transfer, there could be a lot of

stipulations. Sometimes when you do decide which lender to go with it

depends on more than just rate alone. It depends on the terms and

conditions in the mortgage and the benefits added. So yes, definitely do your

research but do research properly on what rates to get and where they're

available.

– So Mo, how our mortgage rates actually determined?

– So there's two separate types of rates.

So we have let's see, the variable rate.

The variable rates kind of based on the overnight rate which is Bank of Canada.

So that's kind of based on prime rate. So that could fluctuate based on what Bank

of Canada wants to set their benchmark rate—or their overnight rate at. And then

the banks will have their prime rate on top of the Bank of Canada's overnight rates.

Base rates on the other hand are actually based on the bond market. So for

example like, a five year fix is based on a five year bond. Whatever the five-year

bond yield is, there's going to be something similar to that

five year fixed rate. So that's a really good question because a

lot of people don't seem to understand that there are two different types of

rates—how they're calculated. It's not necessarily that since one is low one

should be high. It doesn't really technically work that way. Sometimes

you might have seen it be like that but that's not necessarily the case.

As of right now we are going into a very low rate environment so keep your eyes

out, interest rates should be dropping in the next few months.

As we do know the five-year bond yield rates are actually very low last time I

checked. They're trading at 1.45% meaning that that's technically

the same amount of rate yields that were trading around 2017 when we had little

rates. I'm not saying rates are going to come down to those levels again but we

are in the market for lower rates. So right now is a good time to get out, get

a pre-approval done. Come to a Brookfield show home, speak to an area sales

manager because rates are actually going to be in the decline.

– Last question here is, how do you actually shop for mortgage rates?

– The best thing to do for shopping for mortgage rates first and foremost is one,

find out what is most important to you. So terms and conditions to me are

the most important thing in a mortgage. So talking about skipping a payment—

god forbid if you are sick, you fall ill, you've missed work for a while—skipping

payments is a really big one. So find out if your mortgage lender can offer you

those things first and foremost before you start looking into the rate options.

Some banks will have a relief program they might have 'take a payment vacation

program'. Those are the ones that you really need. All good job loss program,

job loss insurance, those are the things that really matter the most, and then

after that then we can start looking at rates. Because let's say for example you

go for a lender that had a great lower rate but they don't have any of these other

benefits and god forbid you fall on some hard times and the foreclosure on your

home, that extra 0.1 lower than a bank total of giving you this now

doesn't mean a lot because it hasn't really helped you when you need it the

most. So look at terms, conditions and what the product will be offering.

The benefits of the product which is the mortgage, those are to me are the most

important to look at, and then yes a hundred percent you should look at

interest rates as well—and then most of lenders or specialists can actually

look at rates and tell you where these rates are coming from and the reason

why the rates are what they are.

– So you mentioned that mortgage rates were headed down. The question I was

going to ask is, where do you think mortgage rates are headed,

and why do you think that?

– So 2019 is the bond yield rates.

They're trading at a lot lower than they were in 2018. So we're going to—

since five-year bond yields are— the five-year bond kind of determines

what the five your fix rate's going to be.

so just because of that it's going to translate into lower five year fix rates

in 2019. That's just how they work. So in the next couple of months we are already

seeing some decline coming and then we'll start seeing some more decline

coming in the next couple of months.

– So the question of the day I have for you is,

are the mortgage rates in 2019 going to affect your decision to buy a home,

yes or no? Let us know in the comment section below. Thank you very much for

watching, and remember if you enjoyed and found this video helpful, make sure to

share and like, and subscribe. Thank you and we'll catch you next time.

– That's another edition of

Homebuyer's School. Tune in next time

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