The decision to choose a fixed or variable rate is not always an easy one. It should depend on your tolerance for risk as well as your ability to withstand increases in mortgage payments. You can sometimes expect a financial reward for going with the variable rate, although the precise magnitude will change depending on the economic environment.
Fixed rate mortgages often appeal to clients who want stability in their payments, manage a tight monthly budget, or are generally more conservative. For example, young couples with large mortgages relative to their income might be better off opting for the peace of mind that a fixed-rate brings. A variable rate mortgage often allows the borrower to take advantage of lower rates -- the interest rate is calculated on an ongoing basis at a lenders’ prime rate minus a set percentage. For example, today's prime mortgage rate is 3.00 percent, the holder of a prime minus 0.5 percent mortgage would pay a 2.50 percent variable interest rate. As a consumer, the best option is to have a candid discussion with your mortgage professional to ensure you have a full understanding of the risks and rewards of each type of mortgage. Feel free to give me a call at 647-893-2535 to further explore this topic.
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As you know, your variable rate mortgage, line of credit and/or student loans are all based on the Prime Rate and here is an update from me on the recent Bank of Canada announcement on changes to their Overnight Rate which in most cases impacts your Prime Rate.
At 10:00 am EST, Wednesday October 22nd, 2014 the Bank of Canada again did what we expected them to do … they continue to maintain their overnight rate and in fact are not likely to make any change until possibly 2016 now! This means variable rates or lines of credit will not change and are still at fab low rates as much as 2.30%. Fixed term rates still really low at the 2.84% mark which is amazing – back to where we were this time last year. Clients who are first time homebuyers, want to refinance high interest debt or purchase investment properties etc, should review their options now. if you or anyone you know just got a little carried away and have some high interest credit card debt that you can’t seem to pay off in full each month, now is a great time to chat about options with rates so low. Maybe you are planning a renovation project soon or purchasing a second home or rental property – chat to me about your options so we can work on how much unnecessary interest we can save you but also get you closer to that Mortgage Burning Party! It’s never too late to start planning. So to continue with the Bank of Canada news, here is an excerpt of the announcement and what they had to say about their decision today.... |
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