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Purpose
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To compare
the potential benifits / disadvantages of locking in a variable rate mortgage
to a fixed rate.
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Instructions
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Complete
the Prime Variables and Mortgage Variables sections.
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Definitions
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Payment
Increase Privilege
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This
value must be entered when comparing a variable mortgage with fixed rate
payment amount.
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Prime
Cap
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The maximum (for increases in prime) or minimum (for
decreases in prime) prime value over the term of the mortgage.
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VRM
Payment Override
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Allows
you to enter the actual variable payment amount if it varies from the
calculated amount.
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VRM
with Fixed Rate Payment
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This scenario assumes that your client takes a variable
rate mortgage, but can afford to make the current fixed rate payments. The payment is limited to the payment
increase privilege of the variable rate mortgage.
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This
scenario allows your client to take advantage of the low variable rate while
making fixed rate payments, reducing the total interest paid and the
amortization.
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These
payments may exceed the fixed rate payment in order to avoid negative
amortization.
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Limitations
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Maximum
term is 5 years.
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Pre-defined
prime increase / decrease amounts.
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