Fixed or Variable Mortgage 👉🏻Find Out Which Option is Best | Variable Rate Mortgage vs Fixed Rate


This is Jeff O’Leary – ‘The Village Guru’ Mississauga Real Estate Broker and in today’s episode I’m going to compare fixed-rate mortgages versus variable rate mortgages. We’re going to go through the pros and cons and see which one is right for you. This video is great for homebuyers you’re not gonna want to miss this let’s get started! When you’re buying a home there’s a
lot of things to consider. Not even with the home search process but actually how do you get a mortgage, how do you qualify there’s just a million questions so today I thought I would focus on one little aspect which is – what type of mortgage you’re
going to get. The first mortgage I want to talk about is
fixed-rate mortgages. A fixed-rate mortgage is where the interest rate remains the same throughout the term of the mortgage. Fixed rate mortgages are super predictable and that’s what’s so good about them. You never have to worry about mortgage rates going up during the term of your mortgage you know that payment is going to be the same month after month they’re a great option if you’re a younger buyer or you’re borrowing a lot of money and you want to make sure you have enough month a month and you can’t afford a rise in interest rates. Finally, they’re really good if you expect interest rates to go up in the near future. Now let’s talk about the downside of fixed-rate mortgages. Well first off the interest rates are higher than a variable rate mortgage. You’re gonna pay a premium to the bank for locking in your rate, that’s just the
way it goes. Second, if interest rates go down during
the term of your mortgage you’re going to be the loser because variable people are
gonna have less interest (to pay) while you’re paying the same interest. So it’s really a balancing act between security and playing the market and going with what the market rates are out there. So let’s talk about variable rate mortgages. A variable rate mortgage is where the interest rate fluctuates with the market during the term of your mortgage. So when it comes to variable rates there are a couple of different products so it’s important you understand this before you start shopping for a mortgage. The first one is a variable rate where your payment remains the same throughout the course of your mortgage. If you start off at one interest rate and then interest rates rise your payment remains the same
but what ends up happening is you’re paying less and less towards the
principal of your mortgage and more interest. The second popular way a variable mortgage works is on an adjustable basis. That means as interest rates go up your monthly payment goes up also and the same can be said the other way if interest rates go down, your monthly
payment goes down. This is where it’s important where you need to look at different lenders because all lenders have different criteria and it’s important that you review this with your mortgage person and really understand the type of product that you’re getting. Now let’s go over the pros of a
variable mortgage. Well number one, a lot of people have saved thousands of dollars over the last 10-15 years by going variable because the rates have
been lower than fixed rates and we’ve been in a market for the most of the time… except for very recently where interest rates were always going down so if you’re in a market where you expect interest rates to go down or stay steady then variable will probably be a really good option to go for. Number two is if the “spread” is wide between fixed and variable So the Bank of Canada posts interest rates and you can find out what the going rate is for fixed and what the going rate is for variable and if there’s a big “spread” that means there’s more of an opportunity to capitalize on that middle and get yourself a much lower rate. So let’s go over the cons of a variable rate mortgage. Well, the big one in the room is this if interest rates go up, your payments are going to go up. So you’ve got to be financially prepared to handle something like that. Another thing is, are you the type of person who likes to monitor interest rates and keep an eye on your investment? Unlike fixed, where you ‘set it’ and ‘forget it’ if you’re on a variable rate mortgage you need to pay attention to what’s
going on in the market because if you kind of clue out for 6 months you could turn around and find out you’re paying a heck of a lot more in interest and your payments are slowly going up and up and up. Finally, if money’s tight for you and you need stability and your monthly payments then a variable rate mortgage might not be the right choice for you. At the end of the day, this is where it comes down to personal preference. Well, I hope you enjoyed my video on fixed-rate mortgages versus variable rate mortgages. This is just a quick video to give you an idea of the different products out there I highly suggest you talk to your bank or find an awesome mortgage broker and they’ll be able to break this down even further and when you’re dealing with them, ask them the questions based on your lifestyle of what’s better for you. At the end of the day there’s no right or wrong answer you just need to find out what works for you. Well there you have it I’m Jeff O’Leary – The Village Guru I hope you enjoyed this video and if you did give it a thumbs up subscribe to my channel and share it with your friends. Thanks for watching and we’ll see you soon!

Paul Whisler

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