Fixed versus variable mortgage rates
When shopping around for a mortgage, one of the choices every borrower must make is whether to select a fixed or variable mortgage rate.
One of the first decisions every home buyer will make is to opt for a fixed or variable mortgage rate. A fixed rate will stay the same throughout the term of the mortgage, while a variable rate will fluctuate with the prime lending rate. Variable rates are traditionally stated as Prime + or - a certain percentage.
To choose between fixed and variable rates, one can consider the following factors:
Fixed rates:
- Determined and locked in for the term of the mortgage.
- Ease budgeting and provide peace of mind.
- Lenders often offer different repayment options allowing for faster re-payment of the mortgage.
Variable rates:
- Fluctuate with the prime lending rate, meaning that the interest portion of the payment may flucutate over the term of the mortgage.
- Historically, studies have shown that variable rate mortgages prove less expensive over a longer period of time.
While the amount of interest paid over the term of the mortgage is a significant deciding factor, borrowers should also consider their personal budget when making this decision. For more information about fixed and variable rates, talk to an Ottawa Mortgage Broker.