What’s a fixed mortgage rate?

A fixed rate will stay the same for the duration of your term. By choosing a fixed mortgage rate, you are essentially “locking in” to pay that exact amount for each mortgage payment you make until you re-sign when the term is up.

+ Fixed rates offer stability. When the market fluctuates, you will know that your payment will be the same this month as it was last month.

+ When the rates rise, your payment will not. Rates can rise at any given time, it is great to know that if they do, you will not have to pay that extra cash out of your pocket.

– When the rates fall, your payment will not. If the rate drops significantly you may be stuck paying a higher rate for the duration of your term, depending on the mortgage you have chosen.

What’s a variable mortgage rate?

With a variable rate mortgage, your payments will fluctuate as the ‘prime rate’ (market interest rate) rises and falls.

+ Usually, a variable is substantially lower than a fixed and You have an opportunity to save thousands of dollars a year, based solely on the interest

+ If the prime rate falls, the rate you are paying will also fall, lowering your mortgage payments

– If the prime rate rises, your interest will increase, and your payments in turn will also rise.
What‘s better? Fixed or variable?

While variable rates do tend to be cheaper over time, the majority of Canadians will opt for a fixed rate year over year. If you follow a strict budget and prefer to know exactly how much your payments are, you are likely better off signing a fixed rate mortgage. If you are not a risk taker, a fixed rate is the best option for you. That being said, if you are willing to risk money to save money – go with a variable rate!

No one person has the same set of needs when it comes to a mortgage, so it is always best to get advise from a professional who can coach you through. Choosing the right mortgage depends largely on the current rates – are they low or high? Are they expected to rise or fall? This is all important when selecting which mortgage to choose!

Of course, even if we do know that the rate is going to rise or fall, there are various other pro’s and con’s for each option.

If you are still unsure after reading this, give me a call or shoot me an e-mail or text message. I am here to coach you through the process and save you money!