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Every individual has different lending needs. A fixed rate mortgage may work for your neighbour but can it work for you? On the other hand, you may find a variable interest rate mortgage more beneficial to your economic situation. What about mortgage terms? Do you think three years is too little but 10 years is too long? For those who want to take advantage of falling interest rates when they occur and want the middle ground between a three-year and 10-year term, a five-year variable rate mortgage may be right for you.

What Is a Five-Year Variable Rate Mortgage?

A five-year variable rate mortgage is a loan that has a term of five years. When your mortgage is variable, it means that your interest doesn’t remain constant. In a variable rate mortgage, rates are subject to change based on the fluctuations in the Canadian marketplace. The Bank of Canada sets the prime rate, which is the rate at which banks lend to their most credit-worthy customers, and is how rates are calculated for your variable rate mortgage.

Is Five Years a Long Time To Commit To a Variable Rate?

Five years is only the term of your mortgage. The amortization period is the length of time you have to pay back the loan in its entirety. This means that if you don’t want to have a variable rate after your five-year term is up, you can switch to a fixed rate mortgage without penalty. However, if you wish to break your mortgage before it comes to term, you will have to pay a hefty price. The price will depend on the details outlined in your original mortgage documents.

How Do Borrowers Generally Set Up Their Payments With a Variable Loan?

When you set up your mortgage, the lender may have specific ways they’d like you to pay. Mostly, when it comes to variable rate mortgages, you have two payment options. You can make fixed payments where your payment stays the same amount and depending on the interest rates at the time you pay, either the bulk of your payment will go towards your principal or your premiums. You can also make what are called floating payments where your payment amounts fluctuate based on the prime rate.

What Is The Best Way To Pay Off a Variable Rate Mortgage?

When you meet with a broker to acquire your mortgage, ask them for insight on the different payment options for your variable rate loan. Your mortgage broker will help you assess your financial situation and offer advice on how long your term should be and how you should set up your monthly payments.


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Your home is your most valuable asset. It is probably the single largest investment you will make in your lifetime. Your home is more than a place to rest your head and raise a family. Your home contains equity. It is a treasured resource and in some cases, can even be used as an ATM (aka cash back mortgages and HELOCs – don’t worry we’ll get there).

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