{"id":210648,"date":"2021-05-15T20:00:00","date_gmt":"2021-05-16T00:00:00","guid":{"rendered":"https:\/\/milesopedia.com\/news\/should-you-get-fixed-or-variable-mortgage-in-canada\/"},"modified":"2024-05-31T13:18:05","modified_gmt":"2024-05-31T17:18:05","slug":"mortgage-premium-fixed-rate-variable-canada","status":"publish","type":"post","link":"https:\/\/milesopedia.com\/en\/personal-finance\/mortgages\/mortgage-premium-fixed-rate-variable-canada\/","title":{"rendered":"Mortgages: Should you get a fixed or variable mortgage in Canada?"},"content":{"rendered":"

[vc_row][vc_column][vc_column_text el_class=”checkmarks”]The economy has had a significant effect on mortgage rates, and a few factors play a role. In Canada, there are both fixed and variable mortgage rates<\/a>.<\/p>\n

Choosing between a fixed or variable mortgage rate can be one of the most important decisions you make when buying a home. Choosing the wrong interest rate could cost you thousands of dollars in the long run!<\/p>\n

Before making any decisions, consider the differences and what makes each rate unique.[\/vc_column_text][\/vc_column][\/vc_row][vc_row][vc_column][vc_custom_heading text=”Fixed rate mortgages” google_fonts=”” el_id=”fixed_rate_mortgages”][vc_column_text el_class=”checkmarks”]When your mortgage rate stays the same for the duration of the payment, it’s called a fixed rate mortgage. Let’s say you have a 20-year fixed rate mortgage; your rate will be fixed for the entire term. Many call this “locking in” your rate.<\/p>\n

Terms can be long or short, the most common being five years. For example, if your mortgage has a fixed rate of 3%, you will pay annual interest at 3% for the full five years, even if Canadian interest rates rise or fall during that time. You will be able to renegotiate the mortgage<\/a> for a different term and you will have the option of choosing a fixed or variable mortgage. This cycle will continue until your mortgage is paid in full.<\/p>\n

Fixed rate mortgages are perfect for new homeowners who need to know their mortgage payments for years to come, as their income stays the same for years before increasing. It’s also very convenient for people because you can budget more efficiently.[\/vc_column_text][\/vc_column][\/vc_row][vc_row][vc_column][vc_custom_heading text=”Variable rate mortgage” google_fonts=”” el_id=”variable_rate_mortgage”][vc_column_text el_class=”checkmarks”]When your rate changes during the term of the loan, it is called a variable rate mortgage. If, for example, you have a 10-year variable rate mortgage, your rate can change at any time during the term of the mortgage.<\/p>\n

These changes usually occur when the Bank of<\/a> Canada adjusts its interest rates. The variable rate is based on the lender’s prime rate, which is only offered to customers with good credit and payment history.<\/p>\n

A variable rate mortgage offers you the advantage of being able to convert from a lower interest rate to a fixed rate mortgage at any time.<\/p>\n

Variable rate loans generally have a lower interest rate than fixed rate mortgages. This is because a variable rate is more risky. Even though there is a higher risk, you have the opportunity to pay off your loan faster.[\/vc_column_text][\/vc_column][\/vc_row][vc_row][vc_column][vc_custom_heading text=”Fixed payments with a variable rate” font_container=”tag:h3|text_align:left” google_fonts=”” el_id=”fixed_payments_with_a_variable_rate”][vc_column_text el_class=”checkmarks”]If the interest rate goes up, the payments that pay the interest will be higher and the payments that pay the principal will be lower.<\/p>\n

If the interest rate decreases, the payments to repay the principal will be higher. This will give you the opportunity to pay off your mortgage faster.<\/p>\n

Your lender may increase your payments if market interest rates reach a specific trigger point or percentage. The increased payment allows you to pay off your mortgage before the end of the amortization period<\/a>. You can find the trigger point in your contract.[\/vc_column_text][\/vc_column][\/vc_row][vc_row][vc_column][vc_custom_heading text=”Pros and cons of fixed and variable mortgage rates” google_fonts=”” el_id=”pros_and_cons_of_fixed_and_variable_mortgage_rates”][vc_column_text el_class=”checkmarks”]There are pros and cons to consider for both a variable rate mortgage and a fixed rate mortgage.[\/vc_column_text][vc_custom_heading text=”Fixed mortgage rates” font_container=”tag:h3|text_align:left” google_fonts=”” el_id=”fixed_mortgage_rates”][vc_column_text el_class=”checkmarks”]Benefits<\/strong><\/p>\n