February 2012  |  Edition #38
Mortgage Loan Minute 60 seconds to informed home ownership
In This Issue
Tracy's Q and Eh?
RRSP Loan or Cash Back Mortgage?
Amazing But True Golf Facts

  Current interest rates: 

  Prime Rate ....................  3.00
  Qualifying Rate ..............  5.29
  3 year fixed ...................   2.89
  5 year fixed ...................   3.19
  7 year fixed ...................   3.89
  10 year fixed .................   3.89  
  Variable rate .................   2.85
  (Prime - .15%)

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Tracy Irwin, AMP

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Tracy's Q and Eh?

Q:  Which part of Canada boasts having the most expensive 2-bedroom apartment rental in 2010?

Eh: CMHC says bragging rights belong to Iqaluit, Nunavut at $2,365 per month. Second place goes to Yellowknife at $1,486 per month. [Ouch... cold and expensive at the same time.] 
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This month's mouth watering mortgage morsel serves up two options for cash strapped RRSP investors. The first is the obvious RRSP Loan. The second solution is a Cash Back Mortgage. The RRSP deadline for 2011 contributions is February 29, 2012, by the way. Read on!      
RRSP Loan OR Cash Back Mortgage?

An RRSP Loan is simply a straight loan secured against other assets or investments instead of your house. RRSP Loans are meant to be short-term.

A Cash Back Mortgage is different from an RRSP Loan in that it provides you with 1 - 7% of your mortgage in cash on closing. You can take that cash and immediately make an RRSP contribution.


Each has its relative benefits...

RRSP Loan advantages: 

  • You can sometimes borrow more with an RRSP Loan than with a cash back mortgage, depending on the mortgage amount and lender. 
  • Unlike a Cash Back Mortgage, there is no claw-back of cash to consider with an RRSP Loan. If you decide to break a Cash Back Mortgage early, you typically must pay back a pro rata portion of the cash you received.

Cash Back Mortgage advantages: 

  • Monthly payments are normally lower on funds borrowed for RRSP contributions. That's because the amortization period of a mortgage is typically longer than an RRSP Loan.  
  • Most mortgages compound semi-annually. In contrast, RRSP Loans often compound monthly, which is slightly more costly.

Key Difference between an RRSP Loan and Cash Back Mortgage is the interest rate.  

  • RRSP Loan rates:  currently 3.0 to 7.0% depending on lender, amount, qualifications, term, etc.  
  • Cash Back rates:  usually 0.40% to 2.00% more than a standard fixed mortgage, which means roughly 3.60% to 5.29% today. Again, the rate is dependent on factors such as lender, amount, mortgage term, etc.

Want to learn more? Contact me today!  

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Amazing But True Golf Facts
The only golfer to be named the youngest and oldest player to win the Masters in 1963 and 1986 was The Golden Bear himself, Jack Nicklaus.

Tracy Irwin, AMP
Mortgage Broker

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R.D.M. Financial Consultants Ltd. o/a The Mortgage Centre | Each office is independently owned and operated | Brokerage Licence # 10716, Broker Licence # M08007700 | 418 North Service Road East, Unit 1D | Oakville | ON | L9W 2E7 | Canada