When it comes to your finances, do you feel comfortable taking risks? For many Canadians, the answer is no. If you’re not comfortable taking risks with your bank account, you’re probably an ideal candidate for a fixed rate mortgage.
When you take out a fixed rate mortgage, your interest rate is locked in for the entire term of your loan. You won’t have to worry about your interest changing and varying the amount of your payments. Interest rates can fluctuate over the term of your mortgage, but with a fixed rate loan, you can rest easy knowing that your rate will always be the same.
Variable rate mortgages allow you to benefit from lower interest rates as they occur in the market. For some people, they prefer to reap the rewards of falling rates. Of course when rates increase, if you have a variable rate mortgage, you will have to contend with the higher rate.
When you have fixed rate mortgage, your interest rate will be higher than a variable rate loan. However, you don’t have to concern yourself with the ebbs and flows of the market and will know exactly how much to budget for your monthly mortgage payments. Many borrowers find this quite comforting and would rather know their rate right off the bat as opposed to taking a risk in the off chance that interest rates will drop tremendously.
Although fixed rate mortgages may seem like they are the more vanilla option when it comes to loans, they do provide borrowers with great benefits. Just because you don’t get access to a varying interest rates doesn’t mean you won’t save money in the end.
For example, if rates rise your mortgage payments won’t be affected. Fixed rate mortgages offer financial stability. They allow you to better budget your money knowing exactly what you need to put away every month for your mortgage. Unlike a variable rate mortgage, there are no surprises with a fixed rate loan.
If you start with a fixed rate mortgage and realize that it’s not actually ideal for your financial situation, you don’t have to stick with it for the entire life of your loan. When your mortgage has reached its term, you can always talk to your broker about switching to a variable rate when it’s time to refinance.Back
Canada’s mortgage website
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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