save by comparing
rates when shopping

for a home mortgage

THE LATEST wrinkle in consumer home financing is
something called the ‘‘declining rate”? mortgage.

Launched in May, the new-style
mortgage comes in two terms, a
sevei-year and a five-year. For
the seven-year term the rate starts
out at 9.25% and the five-year at
8.75%.

In each case the rate drops
(declines!) by a quarter point each
year to a final rate of 7.5%.

On the surface that may appear

&é The risk, of course
is that interest rates
will be higher when it
comes time to
renew, 99

to be pretty good.

. But hold: on. As any chartered
. accountant, will point out — how
does that compare with . going
rates for regular mortgages?

“ Currently the one-year mort-
gage rate stands cround 6.5% (or

. better),. the-.two-year at .-7.75%, .°

the three-year. at 8.25%: and the
five-year at 8.5%.”

So, already some of the shine j is
going off the declining - rate. deal. :
“But let’s take a closer look. -

“Suppose you. go for. the seven-
. “year declining rate package. That
“means on a $100,000 morigage the

monthly: payments start. out at’

844, reducing by ‘about $16 a
_ month‘ each year for the remainder
“ofthe ‘term, with ‘a final year’s
onthly payment of $746.”
Now, if you opted. instead for
‘the standard one-year mortgage of
“6.5%, your monthly payments on
-: the same $100,000 would be only
$670 — $174 less ‘Per month than.
‘the other. :
: The risk, of course, is that in-'

. WHAT TO

By Rick Bates
Contributing. Writer

terest rates will be higher when it
comes time to renew. But that
may not be such a big gamble.

To leave you in exactly the same
financial situation as the declining
rate mortgage, interest rates would
have to increase substantially —
and they’d have to average
9.125% a year.

So even if the rate increased
next year to 7% or 8% (a major
increase indeed), you’d still. be
well ahead by going with the
one-year term. — if you don’t
mind a little risk.

The other thing is that it gives
you a great opportunity to really
tame your mortgage. And that’s
the name of the game.

Suppose that you upped your
monthly payment from $670 to
$844, the same as the: first year
declining rate payments.

This way you would - _ shave
about $2,100 right off the top of
your mortgage.

- So when it comes time to renew,
the principal would be less than
$98,000 — and not $100,000.

--- You'd also save a lot in interest.

And further suppose that if in-

‘terest rates stayed at the 6.5%

level while you kept paying $844 a
month, you’d have your entire

_ mortgage paid off in less than 16

years, instead of 25.

The big plus here is that in such
an. event your total interest cost
would be $58,790 compared with
$133,118 in the case of a seven-
year declining rate mortgage.

So it pays to chesk the numbers
very carefully. !

Rick Bates is assistant professor

of accounting. and finance at the
University of Guelph.

o WITH IT

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For your “1993 RASP Kit" please cal) 844-5380 or 1-800-663-0706 (B.C. Toll-free) or
Fax this ad to 669-6392 or complete and return the coupon below.

Cn ee ee a iT

j GENTLEMEN: PLEASE FORWARD YOUR 1993 RRSP KIT |

: NAME .
{ :
| ADDRESS
TITY vococccccccscsssssssssssssseessessses POSTAL CODE .

J e&
E a 1869 - 609 Granville St., Vancouver, B.C. V7¥ 1A3
a galum Tel: 844.5380 (24 Hours)

[SNR BAU sciatncsansinc tates ME

CHRIS TIDD/ANDREW EISENBOCK
ODLUM BROWN LIMITED

QULNY or 1-800-663-0706 (B.C. Toll-Free)

Lo ee we

Our Year End Means
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TO OUTPERFORM, YOU. NEED»
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“MUTUAL FUNDS
WE MANAGE.
TO OUTPERFORM.

All returns, audited by Emst & Young, Chartered Accountants, are historical annual compounded total rates of return

and reflect changes itt anit v; alue and distributions reinvested. They do not take into account sales charges
oradministrative fees payable by unitholders which would have reduced returns. Past performance does not |
guarantee future results. Your unit value and investment returns will Muctuate. Important information about any
mutual fund is contained in its simplified prospectus. Read your prospectus carefully before i investing.
You can obtain one from Trimark Mutual Eunds or from Wood Gundy.

To receive more information on Trimark’s Mutal Funds contact Ann L, Barends, C.A.
by phone: at (604) 661-2308 fax: (604) 687-2120 or complete the coupon below.

ANN L. BARENDS

Name:
WOOD GUNDY INC.
2100 — 885
West Georgia St. City:
Vancouver, B.C.
V6C 3E8

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