The Montreal Real Estate Blog

Interest rates are still low, but they’ve been steadily increasing. Here are some points to help you make the right mortgage decision.

If you are buying a home, you may be wondering whether it’s better to lock in a fixed rate in case rates continue to go up, or choose a variable rate that floats with the prime rate. Similarly, if your existing mortgage is variable, you may be wondering whether now is the time to lock in.

Mortgage rates are difficult to predict. It is best to base your decision on your personal situation and comfort level, rather on economic expectations.

Going variable

Variable-rate mortgages can be attractive - the interest rate is lower than for a fixed mortgage of similar size and duration.

With some mortgages, as rates fluctuate, so does the amount of your mortgage payments. Or, with set payment amounts, the portion of the payment that covers your mortgage principal will fluctuate.

In an environment of falling rates, you’ll pay down more principal and pay less interest. But if rates go up, your principal payments will shrink and it may take you longer to fully pay for your home.

Should you choose a variable-rate mortgage? If you can tolerate the uncertainty, the variable rate could save you money over the long term.

Locking in

When you lock in to a fixed-rate mortgage, the interest rate will be higher than for comparable variable-rate products. The benefit, however, is that your rate is fixed for the term of the mortgage.

Even if rates in general rise substantially, your rate is guaranteed not to change. From the moment you lock in, you’ll know exactly what your payments will be and how much of the principal will remain at the end of the term.

Should you choose a fixed-rate mortgage? If fluctuation rates are going to keep you awake at night, then a fixed-rate mortgage may be worth the peace of mind it can give you.

Your decision

Ultimately, the decision to choose a variable or a fixed-rate mortgage is as personal as choosing the right home. It should always be made with informed advice from a professional, who can help you evaluate the options based on your unique circumstances.

For any questions about mortgage financing, programs, options, interest rates etc., feel free to contact Danuta at 1-800-605-6154

Written by Danuta Levitzki.
Conseillère en Financement Hypothécaire | Mortgage Loan Specialist
Visit her website

Photo: Caribb

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