Deciding between a fixed and variable rate mortgage.
You may find it difficult to decide between a variable-rate mortgage and a fixed-rate mortgage. When choosing which option is right for you, consider these factors:
If the overnight lending rate changes, your variable interest rate may fluctuate during the term of your mortgage. Variable-rate mortgages are based on the overnight lending rate that is determined by the Bank of Canada.
Benefits of a variable rate mortgage:
Disadvantages of a variable rate mortgage:
Consider a fixed-rate mortgage if you are not willing to take any risk and do not want to worry about paying a higher interest rate on your mortgage.
Benefits of a fixed-rate mortgage:
Disadvantages of a fixed-rate mortgage:
If you need help determining the right option, we can assist you. Call us at 647-773-4849 today.
If the overnight lending rate changes, your variable interest rate may fluctuate during the term of your mortgage. Variable-rate mortgages are based on the overnight lending rate that is determined by the Bank of Canada.
Benefits of a variable rate mortgage:
- They have historically been cheaper over the last twenty-five years compared to the five-year fixed rates.
- There is more flexibility when breaking your mortgage because the penalty is just three months' worth of interest.
- If the rate drops during your mortgage term, you will save more money.
Disadvantages of a variable rate mortgage:
- Fluctuating payments; interest rate could rise.
- Some variable rate mortgage products are not portable, meaning you cannot move your mortgage to a new property if you sell.
- A blend and extend option is usually not available with variable rate mortgage products.
Consider a fixed-rate mortgage if you are not willing to take any risk and do not want to worry about paying a higher interest rate on your mortgage.
Benefits of a fixed-rate mortgage:
- If you want to refinance without paying a penalty, you can port your mortgage to a new property, and blend your rate.
- With no unexpected costs or surprise increases to your mortgage payment, you can budget.
Disadvantages of a fixed-rate mortgage:
- More interest can be paid over the term since, if interest rates go up, you are locked into the fixed-rate you chose for the term of the mortgage.
- Higher prepayment penalties if you decide to exit early.
If you need help determining the right option, we can assist you. Call us at 647-773-4849 today.