If you are trying to choose between a fixed or variable rate, it can seem to be a daunting task. That is where we come in to help you choose the best option for you and your own personal situation. The first step is understanding what a variable rate vs a fixed rate is.
A variable rate is a rate that can change as the Prime rate changes. A variable rate is based off the prime rate thus when the Prime rate changes so does the interest rate on your mortgage. This rate with either be Prime rate plus or Prime rate minus. Meaning your monthly payment may fluctuate up and down depending on the Prime rate. Usually, this change can happen every 3 months, this will be detailed in your mortgage documents.
A fixed rate is just as it sounds. It is a fixed rate that does not change for the term of your mortgage. This means that if the Prime rate changes, your interest rate does not. This also means your monthly mortgage payment will stay the same each month for the term of your mortgage. Some would rather have the consistent rate whereas others would like to take the chance to save money in the long run.
So now you are wondering, which one is best? That all depends on you and your own financial situation as well as if you pay attention to Prime rate or not. If you are ok with the possibility of your mortgage payments changing throughout the term of your mortgage than a variable rate may be for you. Often the lowest rate available is a variable rate. However, it would pay to keep an eye on the Prime rate as if it goes up so does the interest you would have to pay. Do keep in mind that should this happen most banks and lenders offer you the ability to take a fixed rate at any time with no penalty. This means that should you see the prime rate start to rise you do have the ability to lock your rate in at the then fixed rate the lender is offering. These details are laid out in your mortgage documents. Should you have any questions about whether or not you would incur a penalty, you are welcome to ask your lender to explain this information or to call us at Team Jardine to help!
If the possibility of your rate changing from time to time is not something you are willing to chance than a fixed rate is best for you. This gives you the security of knowing exactly what your payments will be for the entire term of your mortgage. Most lenders offer rates slightly above the Prime rate on a fixed term. Which means you can still have a low rate and the security of always knowing what your payments will be without the fear of them changing.
Contact Team Jardine today to see what the best fixed and variable rates are!!!