Fixed Rates Vs Variable Rates

As a licensed mortgage broker, I know that the many different options involved with home loans can make the mortgage process feel intimidating. Having to figure out the best mortgage with the best rate and term for your situation can seem like an impossible task.

While I am here to help you figure out the best mortgage options for your current financial situation, I understand that some people want to come to me with questions after they have found out a bit more about the process and the different options that are available to them.

Where mortgage rates are concerned, there will, of course, be slight variations of the current rate that may be offered by different lenders or financial institutions. In addition to these subtle differences, there are also large differences between the two most common types of interest rates.

A variable rate, sometimes referred to as an adjustable rate, is the most common type of interest rate in Canada. Variable rate mortgages are home loans with interest rates that change over time. These changes are made based on a set index that indicates what current base rates should be based on the market.

Borrowers who obtain a variable rate mortgage are usually given an initial interest rate that will remain unchanged for an agreed upon length of time. Once this initial period has come to an end, the interest rate is adjusted and the monthly payment is recalculated to reflect the change in interest rate. At this point, the interest rate, and therefore monthly payment, could go either up or down.

Variable rate mortgages provide borrowers with a limited ability to budget or plan their future expenses, as their rate has the potential to change on a yearly basis. Fixed rate mortgages, on the other hand, are home loans with interest rates that remain constant throughout the entire term of the loan. These types of mortgage rates allow for borrowers to confidently budget their finances, as their monthly payments will be the same for the life of their mortgage.

Borrowers who obtain a fixed rate mortgage, however, do run the risk of being locked into a rate that is much higher, should the market rate fall.

Because there are both advantages and disadvantages to fixed and variable rate mortgages, I can help you figure out which would be the best fit for your particular situation. Give me a call or fill out my secure online application to get your mortgage process started today!