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: 

1. They have historically been cheaper over the last twenty-five years compared to the five-year fixed rates.
2. There is more flexibility when breaking your mortgage because the penalty is just three months' worth of interest.
3. If the rate drops during your mortgage term, you will save more money. 

Disadvantages of a variable rate mortgage:

1. Fluctuating payments; interest rate could rise.
2. Some variable rate mortgage products are not portable, meaning you cannot move your mortgage to a new property if you sell.
3. 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: 

1. If you want to refinance without paying a penalty, you can port your mortgage to a new property, and blend your rate.
2. With no unexpected costs or surprise increases to your mortgage payment, you can budget.

Disadvantages of a fixed-rate mortgage:​

1. 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.
2. 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.