Variable mortgage rates work differently than fixed rates. In simple terms, a variable rate fluctuates with increases or decreases to the Bank of Canada’s prime interest rate. While payment amounts remain the same, with rate fluctuations your monthly payment may pay off more of your principle or less depending on whether the prime rate increases or decreases. A fixed interest rate on the other hand remains intact despite rising or declining rates.
Refinancing a variable mortgage therefore requires additional considerations. While you may be happy with your current variable rate, there are some risks. Many individuals are worried that the future projections of rising rates will increase their interest rate and in effect their monthly payment.
Consumers today are concerned that before their variable rate mortgage comes up for renewal, rates may rise. Due to this uncertainty, many mortgage holders with a variable rate are switching to a fixed rate by refinancing their mortgage. Locking into a fixed rate, at a time of low interest rates, can be a wise choice. However, the advantages of a variable rate and the discount received on this rate type cannot be overlooked. Use our handy Mortgage Payment Calculator and learn if switching your mortgage to a fixed rate is the right move for you.
With so many considerations in mind, it is important to make an educated choice. Let us help with all your mortgage product questions. You may have more choices than you think! Weigh your options by speaking to a licensed mortgage agent at 1.877.915.0915 and have your questions answered.
