With the Bank of Canada hinting strongly at moving up the interest rate, most likely by .25%, we will see an increase in the prime rate most likely to 2.95%. If you have an adjustable rate mortgage then you will see your monthly payment increase to match this new rate. So an Adjustable Rate Mortgage moves up with prime and you continue to gain ground by making your payments.
Variable rate mortgage is different. The VRM works like this, your monthly payment will stay the same but you will now be paying less to principal and more to interest. Not a good scenario if you are trying to pay down your mortgage and gain some equity. In this changing market, we suggest that you review the scenario with your lender and make sure that you are keeping up with gaining on your mortgage. The other scenario can also be that if you don’t adjust your payment that you could end up paying only interest and not be paying down the principal at all. And remember, you can give me a call at 647-893-2535 or email me at [email protected] if you have additional questions. Thanks to my DLC colleague Lane Lane for this article. Sign Up Here for Monthly Mortgage Updates
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