When it comes to mortgages, you have two options: fixed rate and variable rate. Fixed rate means just what it says; your mortgage is at a fixed rate for the entire length of the mortgage. A variable rate mortgage is linked to the prime lending rate which fluctuates, and can change with market conditions.
Many people still choose fixed rate mortgages, but during this unprecedented run of historically low interest rates, a fixed rate can actually be a costly decision.
The lowest rates
Interest rates today are close to the lowest in history, and a variable rate mortgage can make those rates even lower! A variable rate mortgage will only change if the prime rate changes, and this does not happen very often. During this period the rate is almost always much lower than long term fixed rate mortgages. The right variable rate mortgage puts more of your money to work paying down your mortgage quicker, and I love putting your money to work. Don’t you?
Variable rate mortgages don’t always go up!
Most people believe that after their variable rate term expires, their rates will go up. Believe me, this isn’t always the case. The market may not move a lot between when you start and finish your mortgage term, and that can deliver some very tidy savings for you, which you can (I really mean you should) put right down on your loan principle. When you do that, you’ll save a small fortune.
Every advantage helps
Housing prices in most parts of the country are at an all time high, and because of that, smart buyers are shrewder than ever when it comes to looking for any advantage they can find. Again, when rates are low, variable rate mortgages are one of those rare opportunities to actually pay down your mortgage even faster. I’m sounding like a broken record, right?
No one has a crystal ball, but it doesn’t seem likely to me that the Bank of Canada is going to dramatically raise bank rates any time soon. So think of it this way: with the right variable rate mortgage, every year of that mortgage you can put more of your money down against the principal of your loan, not the interest. That will save you tens of thousands of dollars over the long run.
Like anything related to finance and mortgages, you want to explore your options with someone who can help you understand which mortgage option is best for your needs and goals. If you’d like to explore the differences between fixed and variable rate mortgages and which one is best for you, I’m happy to help you give the answers you need. Just drop me a line or email me and I’ll get right back to you. It’s your money, so let’s put it to work for you!
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