Understanding Fixed and Variable Mortgage Options
There are a lot of difficult
decisions that go into choosing the right mortgage, and choosing between a
fixed and variable mortgage is often one of the toughest decisions to make.
Experts may argue about the benefits and drawbacks of these types of mortgage,
but there isn’t one universal choice that is right for everyone. What works
best for you will depend on your unique financial situation. What works for you
today may not be the best choice when it comes time for a renewal.
If you are wondering whether you
should choose a fixed- or variable-rate mortgage, speak to a mortgage specialist
as a mortgage broker, to discuss your situation and receive professional,
impartial advice. A mortgage broker can answer all of your mortgage questions
and address any concerns you have with the mortgage process. In addition to
explaining the benefits of both fixed- and variable-rate mortgages, the broker
can provide excellent advice on other important mortgage characteristics, such
as prepayment privileges and the ability to increase mortgage payments during
Professional mortgage brokers have access to the lowest
fixed and variable rates on the market at any given time. The top brokers may
have up to 50 different lenders competing for your mortgage, which can result
in lower, unadvertised rates being obtained in some cases. Whether it is your
first home or a mortgage for your new vacation house, lower mortgage rates and
payments keeps more money in your pocket.
Fixed-rate mortgages provide a locked-in
mortgage rate for the term of the mortgage. This type of mortgage is an
excellent choice for people who want to be able to budget the exact mortgage
payment for the length of the term. Longer fixed terms tend to carry higher
rates; the buyer pays extra to avoid the risk of rising rates.
Fixed-rate mortgages are great
for first-time homebuyers
people with unsettled finances and anyone who enjoys the peace of mind of
knowing exactly how much the mortgage payments will be. There are different
types of fixed-rate mortgages that allow varying levels of payment flexibility:
- Open fixed
- Closed fixed
- Convertible fixed
typically offer the lowest rates possible. Lower rates are used to offset the
potential risk of rates increasing in the future. If interest rates go down,
more of the mortgage payment goes towards paying down the principal. In the
event that interest rates increase, more of the payment goes towards interest,
which results in the amortization period increasing as well. Variable-rate
mortgages are available in both open and closed variations.
Find a mortgage broker who will
take the time to understand your unique situation and financial history before
providing advice about the fixed and variable mortgage products available.
Choose an experienced mortgage broker with an AMP designation from CAAMP
(Canadian Association of Accredited
Mortgage Professionals) to ensure professional service and a comfortable
experience throughout the entire process. Take advantage of a free consultation
to discuss your mortgage goals and find the right mortgage specialist for you.