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Variable vs. Fixed Rate Mortgage

So, you have finally decided on your dream home? It is time now for mortgage planning. Just like millions of other Canadians, you are standing at the same precipice facing the same dilemma – fixed or variable rate. The debate of ‘Variable vs. Fixed’ rate mortgage is never ending. With home prices soaring and central banks tightening their belts, mortgage interest rates are set to rise. Canada MGC helps you choose the right rate option as per your financial situation.

With the pride of home ownership comes mortgage. This is one of the major goals in every Canadian’s life – home ownership. That’s why mortgage plays an imperative role in buying a home in Canada. Basic aspects to consider before buying a home includes location, mortgage, first-time homebuyers plan etc. But interest rate option is the most prominent consideration.

Variable Vs. Fixed Rate

Before you sign on the dotted line, know the associations that provide mortgage for large purchases including car, home etc. After that, potential homeowners face dilemma over which mortgage rate to pick. When it comes to ‘Fixed vs. Variable rate’ issue, take a look at pros and cons of each. When first-time home buyers know the differences, they can make an enlightened decision. That’s the sign of a confident home buyer! And what makes you confident – Canada MGC experts.

What’s the difference between fixed and variable mortgages?

Variable Mortgage Fixed Variable
Interest rate fluctuates Every Month Interest rate ‘locked-in’ once-and-for-all
Oscillates as per current economic scenario Stable over a longer period
Monthly change in prime rates can lead to financial burden Fixed Interest changes only with Renewal or Term completion
Less People Opt for Variable Rates Most homeowners go for Fixed Rates

Note: Ups and downs in the mortgage market can be the right time for certain homeowner. They can take advantage of the lower variable mortgage interest rates.

Influence of Economy on Interest Rate Decision

The current state of economy determines the choice of interest rate. Most people may ignore this fact over a 25 year mortgage period. This could be a grave mistake! Remember, prime rate depends on the current conditions prevalent in the Canadian economy. Bank of Canada determines prime rate after taking into consideration all the latest economic factors including job growth, unemployment figures, trade data, inflation etc. Generally, when inflation shoots up, so does the prime rate and vice versa.

Variable rate is highly dependent on the prime lending rate. Financial institutions or lenders offer either a discount or a premium in addition to the prime rate. It is this relation of (+) or (-) that determines your monthly mortgage payment. Remember, the relationship between prime rate and discount/premium remains the same. Only the rate varies. As the difference between the fixed and variable widens due to an improving economy, more homeowners will likely opt a variable plan.

Which Mortgage rate plan is the best?

While both equally stand their ground, it’s becomes tough to choose. Extensive research in Canada has revealed that first-time home buyers in Canada prefer fixed mortgage rate. And why not – it gives security and stability throughout the term of mortgage.

Why hassle with mortgage research yourself? Let Canada MGC professionals dedicate their experience and resources to search the most appropriate rate for you. Our experts have years of experience in guiding Canadians for selecting rates as per their budget. Only our specialized mortgage brokers can help you choose the right mortgage rate. Period!