In recent years the gap between variable rate and fixed rate mortgage has abridged significantly. On their rise, the fixed rate mortgage provides certainty for a monthly payment. On other hand, variable rate mortgage is considered to be the riskiest of two options and remains low. So the question arises, which one to choose, a fixed or variable rate mortgage, to some degree it could be answered by analyzing their feature and risks & rewards associated with each type of rate.
Features of Best Fixed Mortgage Rates Canada
At first, they are based on future bonds and are fixed contracts wherein neither your payments nor your interest rates will increase for the duration of contract. You are protected from rate fluctuations and locked into a given rate for a specified period. Allows to buy a property at the high end of your affordability range. It maximizes your borrowing capacity with a low five-year fixed mortgage rates. And finally your risks are averted in fixed mortgage rate products.
Canada Fixed Vs Variable Rate Mortgage
Features of best Variable Mortgage Rates Canada
Primarily, their rates are depend on the Bank of Canada prime rate less a discount. They have an early renewal feature that allows you to lock into than prevailing fixed term at any time. It works as a parachute in the fixed rate product, and the selection is at your discretion. They are risky as compared to fixed rate as the opportunity and timing of lock-in is decided by customers only. The borrower must have to qualify which is on prescribed rate due to recent amendments to the rule. That has made the variable rate mortgage an unattainable option for many first time buyers of product.
Risks and rewards associated with the rates
Variable rate mortgage, also known as adjustable rate or VRM appeals people because their interest rate is considerably lower than that of fixed-rate mortgage products. But it is imperative to understand the risk involved with the variable rate mortgage. The interest rate could increase or decrease without any warning, and it has looked like one of the major drawbacks. Whether a variable rate mortgage product is right for you or not can be decided quickly just by analyzing your capability to afford the increase in interest rates of product. And, you can examine your ability by assessing your current income, earnings, and potential for an increase in your earnings and how effectively it can weather any storms – interest rate increase or decrease in near future.
The reason for your inclination towards a fixed rate mortgage, it allows to prepare an accurate budget of all your future payments. You know what your mortgage payment will be for a specified period, as well as you are well informed as to when your mortgage can be paid in full.
Analysis to find the best Mortgage Interest Rates in Canada
If you can tolerate the risk of not locking into a fixed rate and have owned before, variable mortgage products are a better option for you. Variable mortgage products are an excellent choice for all those, whose earnings are sufficient to absorb the shock of higher rate, and they can better miss the opportunity to lock-in a fixed mortgage at a timely moment. The variable rates are relatively less expensive than fixed mortgage rates and are always a better choice.