The ever long battle of choosing between Fixed Rate vs Variable Rate mortgages...

Are you feeling overwhelmed with the choice of fixed vs variable? Which is better? Will rates go up or down? My friends are telling me to take variable but my family is suggesting fixed. Will Bank of Canada keep rates low? These are some of the common questions and remarks I get from my clients. You are not the only one that have this battle of choice when it comes to choosing the right mortgage term and rate.

When deciding between a fixed-rate mortgage and a variable-rate mortgage, homeowners should consider their financial goals and risk tolerance. There is no right choice. It comes down to what is best for you.

A fixed-rate mortgage offers stability and predictability. The interest rate remains constant throughout the life of the term, meaning monthly payments for principal and interest will not change. This can be ideal for homeowners who plan to stay in their home long-term and want the certainty of knowing their payments will remain steady, regardless of fluctuations in market interest rates. With a fixed-rate mortgage, there’s no need to worry about rising rates affecting your budget, making it easier to plan your finances over the years.

On the other hand, a variable-rate mortgage, also known as an adjustable-rate mortgage (ARM), starts with the Prime Rate that the Bank of Canada initially sets and the lender will provide a discount off that Prime Rate. The Prime Rate adjusts periodically based on market conditions, which means that the monthly payments can fluctuate. This type of mortgage might appeal to homeowners who expect their income to grow in the future, plan to sell or refinance before the adjustable period begins, or are willing to take the risk of rising rates in exchange for the initial savings. The potential downside is that if interest rates increase significantly, the borrower could end up with higher monthly payments, which could strain their budget. enzomortgagesottawa.com