Of The Same Mold

In the battle of fixed vs. variable mortgage interest rates, its hard to say which is overall a better option for you. By assessing your lifestyle, and your financial standing, you will be better able to determine a payment plan more closely catered to your needs.

While a variable rate of interest is lower than a fixed rate, having a fixed rate gives the homeowner a sort of peace of mind in the form of an unchanged figure for the length of the mortgage term.

On the other hand, in a widely publicized study by Dr Milevsky of York University, between 1950 and 2007, one in seven Canadians saved an average of $20,630 on interest payment per every $100,000 over a 15- year period due to lower interest rates offered by variable mortgages.

If you are struggling with this decision, I advise you to seek the professional help of a mortgage broker or advisor, and remember if you can’t decide, there is the option to customise your payment plan to best suit your needs.

With historically low mortgage rates on average of 3% range for a four year fixed rate to 4% for a ten-year fixed rate, first time buyers as well as those hoping to purchase an investment property have every reason to review their mortgages especially if they’re locked at a higher rate years ago and their mortgages are coming up for renewal.

A couple who purchased their condo in Mississauga three years ago at a much higher rate were envious when a friend told them they bought a similar property with a morgage from the same bank for five years at 3.29%.

Breaking their mortgage to go elsewhere for a better rate didn’t make sense given the high penalty that would defeat the purpose, so instead they went back to the bank to increase their mortgage by $20,000 as they plan on renovations. They locked in for three years at 2.99% and more than make up their small penalty.

Meanwhile they intend paying back the maximum of $ 15,000 toward their principle by the end of the year thus bringing their mortgage back to the original level and at the same time enjoying the savings. They increased their amortization period from 15 to 25 years and further brought down their monthly payments, leaving them with more disposable income.

The couple has many options, e.g. investing the $20,000 in tax free saving bonds that will earn them a higher interest or investing in stocks or investing in renovations that will increase the value of their property if and when they sell in the next three years. It is prudent to speak with a qualified financial planner before venturing on different investment options.