Use Low Rates to Your Advantage!

Team Gill • September 15, 2016

In an article I recently published called “Is Now a Good Time to Buy?” we identified that interest rates are at all time Canadian lows and as it’s never been cheaper to borrow money, now is a good time to buy property. In no way was it being said that “because interest rates are low, you should rush out and buy property”. Obviously there is a balance and you should take the decision to buy a property seriously. The point of the article was that while the media would have us believe that the sky is falling and the housing market is crashing around us, it’s not all doom and gloom, there are some silver linings (like low interest rates). 

But the problem with low interest rates is that they can actually perpetuate the housing crash conversation. These low interest rates won’t last forever, inevitably rates will go up. And when they do go up, the question is “are today’s low rates setting people up for failure down the road when rates increase”? Well, let’s have a look and discuss the 5 year fixed rate mortgage. 

Firstly, when qualifying for a mortgage using the 5 year fixed rate, you are able to debt service (qualify) using the contract rate (low rate, currently around 2.39%). This is instead of having to use the benchmark rate (currently 4.74%) like you would on a variable rate mortgage or any term less than 5 years. As such, the low rate on the 5 year fixed allows you to qualify for a much higher mortgage amount compared to qualifying at the higher benchmark rate. The argument is that by qualifying using the lower rate, you are taking on more debt than you can actually handle. 

Secondly, when your 5 year term is up, even after paying on the mortgage for 5 years, if interest rates go up, there is a chance your mortgage payment will go up as well. The media calls this “payment shock” and it’s a real thing. On a modest mortgage amount, with rates as low as they are today, any increase of rate at renewal could mean hundreds of dollars a month extra on your new payment schedule.

Qualifying for a higher mortgage amount based on a low interest contract rate, combined with a higher rate upon renewal, plus a third variable like a job loss, reduced income because of a maternity leave, or significant health/life issue is what leads speculators to make the claim that low interest rates are contributing to the eventual housing market collapse. It’s a reach, but that’s the argument that’s made. 

So, if you find yourself concerned about these things, here is some quick advice on how to avoid payment shock and how to take advantage of today’s low interest rates. 

Just because you qualify for a certain mortgage amount (because of low interest rates or not), doesn’t mean you have to spend that much. If you are worried about a potential market correction, instead of qualifying using the lower mortgage amount, consider setting your personal limit at the benchmark rate instead. That way you are already building in a “stress-test” and are ahead of the game.

Also, just because your minimum payment is based on today’s low interest rate, doesn’t mean you can’t pay more aggressively. Let’s say your payment is set using a 2.39% rate, using your pre-payment privileges, consider increasing your payment to the benchmark rate of 4.74%. This will do two things, it will pay down a lot more of the principal amount in the first 5 years of your mortgage, plus if interest rates do increase upon renewal, you will have already conditioned yourself to be paying a higher payment, and you won’t be shocked by the increase!

If you are thinking about buying a property in the next couple of years, please contact us anytime, we would love to help you arrange mortgage financing. 

Share

Sign up to to our newsletter to hear weekly updates on market news, timely buyer/seller tips, and up to date rates

SIGN UP
Mick & Sheila Gill
CANADIAN MORTGAGE EXPERTS
RECENT POSTS 

Buying a Second Property

By Team Gill • September 9, 2025
If you’ve been thinking about buying a second property and you’re looking to put some of the pieces together, you’ve come to the right place! Whether you’re looking to buy a vacation property, start a rental portfolio, or help accommodate a family member, there are many reasons to buy a second property (while keeping your existing property), which might make sense for you! Now, while there are many great reasons to buy a second property, there is also a lot to know as you walk through the process. The key here is to have absolute clarity around your why. Ask yourself, why do you want to buy a second property? This isn’t a decision to be taken lightly or one that should be made too quickly. Buying a second property should be a strategic decision that allows you to accomplish your goals, and it should include an assessment of your overall financial health. So with clear goals in mind, the best place to start the process is to have a conversation with an independent mortgage professional. This will allow you to assess your financial situation, outline the costs, and put together a plan to make it happen. While purchasing a second property is similar to buying a primary residence, there are some key differences. Just because you’ve qualified in the past for your existing mortgage doesn’t mean you’ll qualify to purchase a second property. One key difference is the amount of downpayment you might be required to come up with. A property that is owner-occupied or occupied by a family member on a rent-free basis will require less of a downpayment than if the second property will be used to generate an income. So, depending on the property's intended use, you might have to come up with as much as 25%-35% down. This is where strategic planning comes in. Consider unlocking the equity in your existing home to finance the downpayment to purchase your second home. Here are a few ways you can go about doing that: Securing a new mortgage if you own your property clear title Refinancing your existing mortgage to access additional funds Securing a home equity line of credit (HELOC) Getting a second mortgage behind your existing first mortgage Securing a reverse mortgage The conversation about buying a second property should include assessing your overall financial health, leveraging your existing assets to lower your overall cost of borrowing, and figuring out the best way to accomplish your goals. And as it's impossible to outline every scenario in a simple blog post, if you’d like to discuss your goals and put a plan together to finance a second property, connect anytime. It would be a pleasure to work with you.

From Summer Shine to Fall Fine: Smart Home Projects to Tackle Before the First Frost

By Team Gill • August 27, 2025
As patios wind down and pumpkin spice ramps up, fall is the perfect reset for your home—and your homeowner game plan. These quick wins boost comfort, curb appeal, and efficiency now, and set you up for a low-stress winter (and a strong spring market). 1) Safety & “silent leak” checks (Weekend-ready) Clean gutters & downspouts. Add leaf guards where trees overhang. Roof scan. Look for lifted shingles, cracked flashings, or moss. Seal the shell. Re-caulk window/door trim; replace weatherstripping. Test alarms. New batteries for smoke/CO detectors; add one near bedrooms. Why it matters: Prevent water intrusion and heat loss before storms roll in. 2) Heat smarter, not harder Furnace/boiler tune-up and filter change. Smart thermostat with schedules and geofencing. Draft hunt. Foam gaskets behind outlets, door sweeps on exterior doors. ROI tip: Efficiency upgrades lower monthly bills and can improve lender ratios if you’re eyeing a refinance later. 3) Fall-proof your yard (so spring you says “thanks”) Aerate + overseed + fall fertilize for thicker turf next year. Trim trees/shrubs away from siding and power lines. Mulch perennials and plant spring bulbs now. Shut off/bleed exterior taps and store hoses to avoid burst pipes. 4) Extend outdoor season (cozy edition) Portable fire pit or propane heater + layered blankets. Path/step lighting for darker evenings (solar or low-voltage). Weather-resistant storage for cushions/tools to preserve value. Neighborhood curb appeal: Warm lighting and tidy beds make a big first impression if you list in shoulder season. 5) Water management = winter peace of mind Re-grade low spots and add downspout extensions (2–3+ metres). Check sump pump (and backup). Look for efflorescence or damp corners in the basement. 6) Mini-renos that punch above their weight Entry/mudroom upgrade: hooks, bench, boot trays, closed storage. Laundry room tune-up: counter over machines, sorting bins, task lighting. Kitchen refresh: new hardware, tap, and under-cabinet lighting in one afternoon. Budget guide: Many of these land under a micro-reno budget—perfect for a modest line of credit. 7) Indoor air quality tune-up Deep clean vents and dryers (including the rigid duct). Add door mats (exterior + interior) to catch grit/salt. Houseplants or HEPA purifier for closed-window months. Fast Timeline (pin this to the fridge) Late August–September Gutters/downspouts, roof/caulking, HVAC service, lawn care, plant bulbs, exterior tap shut-off plan, path lighting. October Weatherstripping/sweeps, fire pit setup, organize mudroom/garage, test alarms, sump check, downspout extensions, dryer vent cleaning. Financing smarter: make your mortgage work for your home Annual mortgage check-in. As rates, income, and goals evolve, a quick review can free up cash flow or open options for a small fall project budget. HELOC vs. top-up refinance. For bite-size projects, a HELOC can be flexible. For bigger renos you plan to pay down, a top-up refi might make more sense. Bundle & prioritize. Knock out the high-impact, low-cost items first (air sealing, safety, water management) before the cosmetic upgrades. Not sure which route fits your fall plans? We’ll run the numbers and map the best financing path for your specific budget and goals. Quick Checklist (copy/paste) ☐ Clean gutters/downspouts; add guards ☐ Roof & flashing visual check ☐ Re-caulk, weatherstrip, add door sweeps ☐ HVAC service + new filter ☐ Aerate/overseed/fertilize; trim trees; plant bulbs ☐ Path & entry lighting ☐ Drain/bleed outdoor taps; store hoses ☐ Downspout extensions; sump test ☐ Dryer vent cleaning ☐ Mudroom/garage organization ☐ Schedule mortgage review / discuss HELOC vs refi Ready to make fall your low-stress season? Book a quick fall mortgage check-up—15 minutes to see if a small credit line or a tweak to your current mortgage could cover your priority projects without straining cash flow.