Canada Mortgage should you get a Variable or Fixed Rate? –

Canada Mortgage should you get a Variable or Fixed Rate? –

Canada Mortgage should you get a Variable or Fixed Rate? : One of the first decisions you make when getting a mortgage is whether to go with fixed or variable rates. It’s undoubtedly one of the most important decisions you’ll ever make. It will have an impact on your monthly payments, and it also has an effect on your mortgage’s total cost over time. It’s tempting to take the best mortgage rates you’re given.

But it isn’t that easy. Both forms of mortgages have advantages and disadvantages, which is why you must understand the differences between fixed-rate and variable-rate mortgages. This should be done before making a decision.

The Definitions


    • Your rate is locked in for a set time known as the term (usually 1,2,3,4, or 30-year mortgage rates
    • The interest rate is usually a little higher. The mortgage broker ensures a stable and regular mortgage payment for years to come.
    • You may be subject to a higher penalty if you default on your mortgage. It is known as an Interest Rate Differential Penalty.
    • It is impossible to convert a fixed-rate mortgage to a variable rate. It is without defaulting on the loan.

Variable Rate:

    • The rate floats or changes over time as the Bank of Canada makes decisions.
    • The rate is calculated by subtracting a discount from the Prime Rate (ex. Prime minus .50 percent).
    • The variable rate is usually lower than the fixed rate. It might float higher for short periods.

In 2022, should you choose variable or fixed refinance rates? Which is the best option for you?
We’ll look at the following to see if we can figure it out:

    • The distinction between variable and fixed mortgage interest rates.
    • There are five reasons why a variable rate could result in more savings now and in the future, including:
    • Long-term historical evidence of variable rate cost savings.
    • Why will the variable-rate be subject to upward restrictions, and what might these limits be?
    • How to reduce the risk of having a variable rate mortgage.
    • Compared to fixed rates, variable rates give more flexibility and lesser penalties.
    • When to lock in fixed current mortgage rates.
    • For many people, a fixed-rate mortgage is still the best option.
    • Examine the advantages of a fixed rate for two to three years.

Is it better to have a variable-rate mortgage or a fixed-rate mortgage?

It would be best if you were not concerned about the financial risk of a variable-rate mortgage in an environment with low-interest rates. In this scenario, a variable-rate mortgage might be a better option because the rate will almost certainly be lower than a fixed-rate mortgage, and it has the potential to save you much money.

If you prefer the security of knowing your mortgage payment will not change, this is the option for you. It doesn’t matter if mortgage rates climb or lower; a fixed-rate mortgage is the best option for you.

Which of the mortgage rates is the most popular?

Approximately 60% of our clients choose a 5-year fixed-rate mortgage, which compares to 30% for a variable one. The rate has been fixed for decades, ensuring that your mortgage payments will not fluctuate for the next five years. It gives you time to establish a payment schedule, and you know exactly how much of your principal is being paid down. A 5-year fixed rate is also a popular word among banks, and it frequently has the most acceptable value.

So, what is the best mortgage rate for you?

Three questions may influence your decision:

    • Can you get a good night’s sleep? This is after learning about the dangers of mortgage rates today.
    • Is your budget ready for a 3–4% hike in your mortgage rate? If prime rises sharply, this is the case.
    • Do you intend to sell your home in the next three years?
    • Do you want to pay off your mortgage faster?
    • To save more or to relax?

We can assist you in obtaining the best possible mortgage rates in Ontario. We’ll figure out the best mortgage rates in Alberta for you. There is no cost or commitment to participate, and give us a call.

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