Fixed Vs Variable Rate

Fixed Vs Variable Rate

Whether you are purchasing a home, renewing your mortgage or refinancing your existing mortgage, Edmonton mortgage rates – fixed or adjustable – can affect your loan options.

Just as you have options when it comes to mortgage products, you have options when it comes to mortgage rates as well. As a team of trusted Edmonton mortgage brokers with the
backing of the Mortgage Tailors, Eva Neufeld and her team are dedicated to
offering every client, the most competitive interest rates for their mortgage needs.

As mentioned before, Edmonton mortgage rates can be influenced by the length of the mortgage’s term, or by the type of the rates.

Variable Rate Mortgage

A variable rate mortgage is a type of mortgage where the interest rate of the loan changes based on the current prime rate. With a closed variable rate mortgage, though, your monthly payment fluctuates anytime there is a change to the Bank of Canada Prime Lending Rate. A closed variable rate mortgage allows you to have some stability by setting up a consistent monthly payment, if you choose too, but allows you also take advantage of the benefits if interest rates fall. Also with variable rate mortgages, the rates are usually lower than they would be with a fixed rate mortgage.

Fixed Rate Mortgage

Simply put, a fixed rate is a rate that remains the same for the entire life of the loan. They are one of the most popular mortgage products in Canada. Fixed rate mortgages feature an interest rate that is “fixed”, for a period of time, usually between 1 and 5 years.

One of the benefits to a fixed rate mortgage is that it’s easier to manage a budget with a fixed rate mortgage, since your payments won’t change

during that term. Another benefit is when interest rates are low and expected to rise over the length of the term, as it allows you to lock in the low interest rate, and not have to worry about it rising – although predicting interest rates is far from a sure thing.

One of the drawbacks of fixed rate mortgages is that interest rates tend to be slightly higher than other types of mortgages where the rate changes; so even you gain stability, you do pay more for it, with a higher mortgage interest rate. Five-year fixed rate mortgages are one of the most popular mortgage products in Canada.

When asking yourself which mortgage is right for you, there are a few basic questions you need to ask yourself:

  • How large of a mortgage payment can you afford today?
  • Could you still afford a variable rate mortgage if interest rates rise?
  • How long do you intend to live on the property?
  • What direction are interest rates heading and do you anticipate that trend to continue?

A mortgage broker can help you decide which of these mortgages would best suit your needs, and find you the best rate possible. If you’re thinking about buying a home, refinancing a mortgage or going through a divorce and need to figure out your mortgage, Eva is one of the top Edmonton mortgage brokers in the area and has a reputation for getting the right mortgage for her clients’ specific needs.

To learn more on how she can help, get in touch with her today!

Categories: edmonton mortgage rates, Home Purchase, Mortgage