A Mortgage Rate Fixed Or Variable Rate?

“Wow!” You cry as you turn to your wife and pressing on the brakes of the car. “Did you see the mortgage rates they advertise? You do not have to worry, you do. You just block your mortgage at a rate like that for the next ten years, and that’s it.”

Not so fast. This rate does not suit you, perhaps not. Usually, the lowest rate available and one who makes the offer so attractive street - is that a mortgage rate variable. This variable rate can result in a roller coaster game. The variable rate shown is the one you get today. Unless you have a crystal ball, you can not predict the changes that await you.

Study the issue more closely. Lenders offer different rates for different types of mortgages. These rates are determined by financial risk - for the financial institution and for you. When a client is ready to take the risk, he is rewarded with a lower rate. If the lender is taking the risk (e.g. promising a rate specific to the client, no matter what the future holds), the rate is higher. More time is longer, the risk is high for the financial institution.

How to decide then? Mortgages fixed rate because they require a low risk tolerance, are usually the best choice for first time buyers who do not own their home long ago. Ask yourself the following questions: Do you know the amount of payments you have to do long term? Would you avoid having to constantly monitor the rates? Your down payment is it below 25%? If you answered yes to any questions or near, a mortgage fixed rate may be a more prudent for you.

The mortgage rate variable is especially appropriate for those who have a flexible budget and a high tolerance for risk. Ask yourself the following questions: Do you keep abreast of market conditions? Can you withstand sudden rate increases that could have the effect of significantly increasing your payments? Will you enjoy the reduced rate to increase your payments and (or) exercise your right of prepayment and pay off your mortgage faster? The net value of your property it is 25% or more? If you answered yes to all these questions, or almost one rate mortgage variable may be more appropriate to your needs.

Some lenders offer special promotional rates during the first months of a mortgage rate variable and then used to exercise an option to “lock” to a fixed rate for the unexpired portion of the mortgage. You can also tell you about another option with your mortgage broker: mortgage loan rate ceiling, which provides assurance that for a fixed term, variable rate will not exceed a certain level.

If the uncertainty of a floating rate might make you sleepless nights, you’re not alone. Most Canadians prefer the certainty of a mortgage to fixed rate. They know exactly how they will pay for the duration of their mortgage, and they can plan accordingly… no surprises. However, if rates continue to fall and tumble, you are bound by the “promise” that you made. The best solution? Ask for professional help to determine the most appropriate option for your needs.

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