Variable Rate Mortgage Or Fixed?

• There are 2 main types of mortgages, fixed rate and variable rate
• With a fixed-rate mortgage, your interest rate and payment stay the same over the mortgage term
• With a variable-rate mortgage, the interest rate can move up or down according to the lender’s prime interest rate.
• Historically Variable rates compared to fixed rates have been proven to be less expensive.

In a fixed-rate mortgage, the interest rate stays the same. As the name suggests a variable-rate mortgage has an interest rate that varies throughout the mortgage term. The fluctuation of the rate happens when the Bank of Canada decides to change the cost of borrowing as the economy heats up or cools down.

Variable rate mortgage’s come with a much less costly penalty in the case you want to sell the property before the end of the term. On average homeowners sell their home around 3.5 years, breaking a fixed mortgage around this time would result in a costly penalty.

For some clients fixed is more comfortable as the uncertainty of rates going up or down is too overwhelming to think about for them. In the current market variable is more sought after as fixed rates have increased.