Mortgage Talk: Fixed or Variable
With market uncertainty and the unknown end to interest rate hikes, it’s no wonder the long debated Fixed Vs. Variable is making headlines.
I myself locked in for a five year fixed mortgage back in 2019 however, historically, variable has always been the better savings. According to Mortgage Professionals Canada, over 75% of borrowers opt for the Fixed.
Fixed Vs. Variable:
Fixed Rate:
When you opt for a Fixed rate on your mortgage, you are essentially locking your payment amount and terms of the loan for the set amount of time. One, three, five, seven and ten year terms are offered by many top lenders. When you lock into a fixed rate, your payments will remain set over that period of time and a set amount will be allotted to the principle and interest. So when the rates go up as quickly as they did this year, you are unaffected and have that security.
Variable Rate:
When you opt for a Variable rate, you are still locking in a specified term however the payment amounts can change as can the amount going to the principle of the mortgage can also change. So as rates increase, less amount will go into your principle and when rates decrease, more money is paid into your principle. The principle is the amount that is being borrowed.
Triggering Interest Rate:
Generally your payments with Fixed or Variable will remain at the set amount. If however, your regular payment is not enough to cover the interest portion of your mortgage, your mortgage payment will automatically increase to cover the accrued interest.
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