Fixed vs. Variable Rate

Variable rates tend to be lower than fixed rates. There is a possibility that variable rates could increase during the term of your mortgage. Overall, you need to decide how comfortable you are with that uncertainty.

To see if a variable rate mortgage product is right for you, you should determine whether or not you can afford interest rate increases. Check if you can afford mortgage payments at a rate 2% higher than the variable rate you are considering. This should be a good indication of how you’ll do financially if rates increase.

What is your personality style? Do you prefer risker investments or safer ones? Do you prefer extra insurance or not? If you prefer more certainty, then fixed rates are for you.

Note that in open variable mortgages, one can switch from a variable rate to fixed rate at anytime. But double-check to see what fixed rate you will be getting. Is it the posted rate or best rate possible? The posted rate will obviously be higher.

Then you need to consider, how much lower is the variable rate vs. the fixed rate? If they aren’t too far apart, then perhaps, a fixed rate is better because you aren’t saving as much with a variable rate.

Forecasting interest rates isn’t a science. There are multiple factors involved in each person’s situation. That’s why it’s helpful to speak with a mortgage agent who is experienced in this field. Contact me today for a personalized recommendation on interest rates based on your unique situation.


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