Variable Rate vs Fixed Rate – What should I take?

The question mortgage consumers are asking is: Should I go Variable Rate or Fixed rate?

The answer is: Depends!

Variable rate is based on the Bank Prime. As the Central Bank Rate increases or decreases, so does the variable rate.

The fixed rate is based on the bond market. As the bond market increases or decreases so does the fixed rate.

The decision of whether to go variable or fixed will depend on the consumers’ tolerance for risk as well as their ability to withstand increases in mortgage payments.

The worrywart, who is constantly looking at interest rates and can’t sleep at night wondering if it is time to lock in, should go with a fixed mortgage rate. The seasoned veteran who has plenty of equity in their home or has little time left on their mortgage, can afford to go variable rate and take the risk.

Most first time homebuyers with minimal down payment tend to go fixed. Over time however, the variable mortgage has always been proven to be better than fixed.

Something to keep in mind is that variable rate mortgages allow consumers to lock in to a fixed rate at any time without costs.

Generally, most economists are stating that the Central Bank will remain steady for the next few months and perhaps will only start to move upwards in early 2012.

So know your options and be an informed client 

For all your mortgage needs call: Eduarda (Eddie) Pita - 416-920-9931

Visit us online at www.eddiemac.ca