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Age-old debate: Fixed or Variable?

June 15, 2018

The question of ‘Fixed versus Variable’ rate mortgages is an age-old debate. In fact, it is typically one of the first questions people ask when shopping for a mortgage.

A fixed rate mortgage is a mortgage where your interest rate remains unchanged and your payments stay constant throughout the entire term of your mortgage. A fixed rate mortgage is considered a low-risk product for borrowers as the mortgage interest rate is set and won’t change regardless of whether rates rise or drop. People who choose fixed rate mortgages tend to do so because it provides them with “peace of mind”.

A variable rate mortgage, on the other hand, is when your mortgage rate fluctuates with the prime lending rate offered by your lender. It means that your mortgage interest rate may move up or down over the term of your mortgage. Hence, the interest you pay is not fixed. A variable rate is usually quoted as Prime +/- a specified amount. The uncertainty of a variable rate mortgage may keep people away from it, but it has the flexibility that a fixed rate mortgage doesn’t have. Breaking a fixed rate mortgage may cost you a small fortune, with a variable rate mortgage, the penalty would be significantly lower thanks to its flexibility. Additionally, historical data shows that a variable rate mortgage is less expensive than a fixed rate mortgage over any 5-year term.

MonsterMortgage.ca has always educated its clients on the pros and cons of both variable rate and fixed rate mortgages in Canada. We have seen first-hand how the variable rate mortgage can save you thousands of dollars in lower interest rates, increased flexibility and greater month-to-month cash flow. Please watch the video below to learn more about fixed and variable rate mortgages.

Overall, it is very important to understand your own financial situations and goals, your personal needs and lifestyle, and product options you have when choosing a mortgage. If you still have any questions regarding fixed rate mortgage or variable rate mortgage, feel free to call us at 416.480.0234 or send an email to info@monstermortgage.ca.