Mortgage advice deja vu

[DGuller]

Yes, during the term of my mortgate, while my rate will not increase, it is possible that interest rates may well increase so that when I come to renogotiate my mortgage I will not be able to negotiate a rate as low as I would wish.

That doesn't make your money expensive.  When you're choosing whether to prepay or not, the cost of your money is the interest on the mortgage that you have right now.  The cost of money doesn't change for you while your interest rate stays the same, in fact the interest rate you have is the cost of money.

Let's say the interest on your current mortgage is 5%, the market interest at time of mortgage renewal would be 8%, and the rate of CD that expires when your current mortgage ends is 7%.  Ignoring taxes and stuff like that, would you rather prepay or invest in CD?  What is the appropriate cost of your money then to use?

[DGuller]

Its really too bad that our resident expert in all things he has heard something about (DGuller) cant understand these basic principles.

I can see that you're a brilliant lawyer.  You're certainly not used to losing an argument.

[crazy canuck]

Yes, during the term of my mortgate, while my rate will not increase, it is possible that interest rates may well increase so that when I come to renogotiate my mortgage I will not be able to negotiate a rate as low as I would wish.

That doesn't make your money expensive.  When you're choosing whether to prepay or not, the cost of your money is the interest on the mortgage that you have right now.  The cost of money doesn't change for you while your interest rate stays the same, in fact the interest rate you have is the cost of money.

Let's say the interest on your current mortgage is 5%, the market interest at time of mortgage renewal would be 8%, and the rate of CD that expires when your current mortgage ends is 7%.  Ignoring taxes and stuff like that, would you rather prepay or invest in CD?  What is the appropriate cost of your money then to use?

That is why I said in my post that you partially quoted from that the investment would have to be good enough to  make up for the interest I would otherwise by paying during the term of my mortgage which is something you have ignored in your analysis.  Of course if I can find a secured investment that gives me the kind of spread you are talking about it makes sense to invest but the whole point of this thread is that people are making the argument that equities are are such an investment when in fact they are much more risky.   Also, there are no guarranteed investments that will give me that kind of spread.

I said I might be tempted to invest rather then prepay if I could be guarranteed that the cost of money would continue to remain low but given the risk is that it will not I am not tempted.  The equities I invest in could underperform in which my conservative repayment looks much better.

It is not surprising to me that you missed the context of the comments. Such is your difficulty in digginf yourself out of your comment that you know more then us about our own system.  A mistake of overreaching you make frequently.

[crazy canuck]

Its really too bad that our resident expert in all things he has heard something about (DGuller) cant understand these basic principles.

I can see that you're a brilliant lawyer.  You're certainly not used to losing an argument.

When I lose one I will let you know.

[DGuller]

That is why I said in my post that you partially quoted from that the investment would have to be good enough to  make up for the interest I would otherwise by paying during the term of my mortgage which is something you have ignored in your analysis.

I didn't ignore it, I just assume it's a given and doesn't even need to be said.  If you're gong to put your money in an investment that you're not expecting to return higher than your mortgage rate, then you're just a moron.

It is not surprising to me that you missed the context of the comments. Such is your difficulty in digginf yourself out of your comment that you know more then us about our own system.  A mistake of overreaching you make frequently.

I can only go by what you say.  If you're saying that the cost of your money could change during the term of the loan that you can tap into, then either your loan is not of fixed interest type, or you fail to understand what cost of money is.

[crazy canuck]

I can only go by what you say.  If you're saying that the cost of your money could change during the term of the loan that you can tap into, then either your loan is not of fixed interest type, or you fail to understand what cost of money is.

Wow am not sure if you are being wilfully blind or you are really that stupid.

[DGuller]

I can only go by what you say.  If you're saying that the cost of your money could change during the term of the loan that you can tap into, then either your loan is not of fixed interest type, or you fail to understand what cost of money is.

Wow am not sure if you are being wilfully blind or you are really that stupid.

I can understand your desire to keep leveling personal insults.  What I don't understand is your inability to recognize that a series of Canadian fixed rate mortgages collectively forms an ARM.

So, I'll be generous and give you another chance to try to say something smart, instead of just having you spew more insults my way.  Let's say that you, in Canada, have a choice.  The first choice is the usual series of 5 year term, 5+ year amortization loans.  The second choice is is a hypothetical ARM with a 25-year term, whose interest is resets every 5 year according to an appropriate index, and where interest rate changes are not capped. 

Assuming an efficient and competitive working of the Canadian banking system when it comes time to renew the mortgages, what is a significant difference to the homeowner between the effect of two such mortgages?  Is the homeowner in one case going to pay significantly more in interest than in another?  Is he going to be more sensitive to interest rate changes in one case than in another?  Is one going to be in more danger of winding up unable to finance his mortgage than another?  Go ahead, point out one significant difference that applies in general.

[crazy canuck]

I can only go by what you say.  If you're saying that the cost of your money could change during the term of the loan that you can tap into, then either your loan is not of fixed interest type, or you fail to understand what cost of money is.

Wow am not sure if you are being wilfully blind or you are really that stupid.

I can understand your desire to keep leveling personal insults.  What I don't understand is your inability to recognize that a series of Canadian fixed rate mortgages collectively forms an ARM.

So, I'll be generous and give you another chance to try to say something smart, instead of just having you spew more insults my way.  Let's say that you, in Canada, have a choice.  The first choice is the usual series of 5 year term, 5+ year amortization loans.  The second choice is is a hypothetical ARM with a 25-year term, whose interest is resets every 5 year according to an appropriate index, and where interest rate changes are not capped. 

Assuming an efficient and competitive working of the Canadian banking system when it comes time to renew the mortgages, what is a significant difference to the homeowner between the effect of two such mortgages?  Is the homeowner in one case going to pay significantly more in interest than in another?  Is he going to be more sensitive to interest rate changes in one case than in another?  Is one going to be in more danger of winding up unable to finance his mortgage than another?  Go ahead, point out one significant difference that applies in general.

I have already answered these questions but apparently your understanding of our system does not extent as far as you think.

By the way, every other American here has understood.  If I were you I would stop billing myself as an expert in anything for a while.

[DGuller]

I have already answered these questions but apparently your understanding of our system does not extent as far as you think.

And I posted a rebuttal, which you ignored in favor of more insults. 

I understand that sometimes people can have a good idea, but be unable to express it well in a debate.  If you think you have such an idea, express it to someone more articulate and even-tempered, so that he can continue the debate for you.  I will not mind it, I prefer having intellectual conversations rather than verbal brawls.

[crazy canuck]

I have already answered these questions but apparently your understanding of our system does not extent as far as you think.

And I posted a rebuttal, which you ignored in favor of more insults. 

I understand that sometimes people can have a good idea, but be unable to express it well in a debate.  If you think you have such an idea, express it to someone more articulate and even-tempered, so that he can continue the debate for you.  I will not mind it, I prefer having intellectual conversations rather than verbal brawls.

This is getting circular and pointless.  For some reason, no matter how many times I explain it, you fail to understand the fundamental distinction between having an amortization period tied to the term of a mortgage and an amortization period which is independant of the term.

Your failure to appreciate this difference makes any intelligent conversation with you on this point entirely useless.

[Barrister]

DG, I grew tired of this earlier, but will give it one more try:

It is clear you do know the basics of mortgages.  And you have a point when you say that a 5 year term mortgage has some things in common with a US ARM mortgage.

The real problem I have is when you make value-based statements like 'calling a 5 year term mortgage a fixed rate mortgage is misleading'.  It is not.  You understand the concepts, but seem to want everyone to use the words you think are correct, not the words everyone uses.  It is frankly a very bizarre argument.

[DGuller]

DG, I grew tired of this earlier, but will give it one more try:

It is clear you do know the basics of mortgages.  And you have a point when you say that a 5 year term mortgage has some things in common with a US ARM mortgage.

The real problem I have is when you make value-based statements like 'calling a 5 year term mortgage a fixed rate mortgage is misleading'.  It is not.  You understand the concepts, but seem to want everyone to use the words you think are correct, not the words everyone uses.  It is frankly a very bizarre argument.

Ok, I'll give that to you.  For better or worse, Canadians use the terms that Canadians use, and I'm not going to change that.  Debating whether they should use the term or not is pointless.  Now can you please explain the part that you agree I have a point on to your colleague?

[DGuller]

For some reason, no matter how many times I explain it, you fail to understand the fundamental distinction between having an amortization period tied to the term of a mortgage and an amortization period which is independant of the term.

With all due respect (which is really none at this point, given how you behaved in this thread), if you really think that, and are not saying this just to piss me off, then you obviously fail to even begin to comprehend the point I'm making. 

I understand exactly the fundamental distinction of a Canadian mortgage.  It's a mortgage which you will have to roll over at yet undetermined rate at some time in the future (like five years), because you will not fully amortize the outstanding loan before the term of the mortgage expires.  Are you with me so far?

[Barrister]

DG, I grew tired of this earlier, but will give it one more try:

It is clear you do know the basics of mortgages.  And you have a point when you say that a 5 year term mortgage has some things in common with a US ARM mortgage.

The real problem I have is when you make value-based statements like 'calling a 5 year term mortgage a fixed rate mortgage is misleading'.  It is not.  You understand the concepts, but seem to want everyone to use the words you think are correct, not the words everyone uses.  It is frankly a very bizarre argument.

Ok, I'll give that to you.  For better or worse, Canadians use the terms that Canadians use, and I'm not going to change that.  Debating whether they should use the term or not is pointless.  Now can you please explain the part that you agree I have a point on to your colleague?

He can read.

But the part you missed is how there is nothing wrong with the terms we use.  Saying that our mortgages have some similarities to an ARM is NOT the same as saying they are not fixed term mortgages.

[DGuller]

But the part you missed is how there is nothing wrong with the terms we use.  Saying that our mortgages have some similarities to an ARM is NOT the same as saying they are not fixed term mortgages.

Is there anything wrong with saying that your mortgages are not "true fixed rate mortgages"?