nesto Inc. Licenses: Mortgage Brokerage Ontario #13044, Saskatchewan #316917, New Brunswick #180045101, Nova Scotia #202507230; Mortgage Brokerage Firm Quebec #605058; British Columbia, Alberta, Newfoundland/Labrador, PEI, Yukon, Nunavut, Northwest Territories.
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What are the benefits of a variable mortgage?
1. If rates fall, more of your payment goes directly towards paying off the principal amount of your mortgage. In other words, you’ll pay less interest on your mortgage throughout your term. However, if you have an ARM you will need to keep your mortgage payments the same to realize this benefit.
2. It’s cheaper to break a variable-rate mortgage – three months’ interest payment vs an interest rate differential (IRD) penalty often associated with breaking a fixed-rate mortgage.
What are the benefits of a fixed rate term?
Fixed mortgages are extremely popular for borrowers who are looking for the convenience of knowing exactly what you have to pay towards your mortgage each month. A fixed rate makes a lot of sense to conservative borrowers because selecting a fixed term guarantees your payments will never change until your mortgage term expires. Many people view a fixed rate as a type of insurance policy that guarantees your rate will not rise over the term of your choice (1-10 years).
Is a variable rate better than a fixed rate?
A variable-rate mortgage has proven over time to save borrowers more money than its fixed-rate counterpart. Still, every borrower’s situation is different, so there are a lot of considerations to make when selecting fixed vs variable mortgage products. With a variable mortgage, the interest rate will fluctuate depending on market rates, whereas a fixed rate remains the same throughout the mortgage term. A fixed rate is, therefore, beneficial for budgeting purposes and offers financial stability given that mortgage payments always remain the same.