Fixed vs. Variable what is the right Answer for You?
Fixed V/S. Variable Rate Mortgage – What Is The Right Answer For You?
You need to know the pros and cons of fixed vs. variable mortgage rates because this will help you decide which type is the best answer for you.
Both of these types of mortgages have their advantages and their disadvantages. The best way to learn about all of the advantages and disadvantages is to do your homework online and to talk to Vijay Gandhi who is a GTA-Toronto Mortgage Agent.
The mortgage professional can help you make the best decision possible because they have all the knowledge and information needed to help you make the smart choice for you. Trying to make the decision on your own can be done but talking to a professional is still necessary to get the type you want.
To help you get started making a smart choice you need to know some of the different advantages and disadvantages for each of these. This will help you see how they differ and help you understand the types better which is very important to making your decision.
Fixed Rate Mortgage
The interest rate for a fixed rate mortgage is locked in for the full term of the mortgage. Payments are set in advance for the term, providing you with the security of knowing precisely how much your payment will be throughout the entire term. Fixed rate mortgages can be open (may be paid off at any time without breakage costs) or closed (breakage costs apply if paid off prior to maturity).
Advantages of Fixed Rate:
1. When you get a fixed rate mortgage you will have security knowing what your payments will be each month until the end of the fixed period. This is a big advantage for a lot of people because it gives you the change to plan your financial future easier.
2. If interest rates were to increase then you will be safe because your payments will not increase since you are at a fixed rate for a certain period of time.
Disadvantages of Fixed Rate:
1. If interest rates should decrease you can’t take advantage of this because you are on a fixed rate for a certain amount of time.
2. You will have to pay a higher interest rate than the SVR or standard variable rate in order to get the fixed rate you want.
With a variable rate mortgage, mortgage payments are set for the term, even though interest rates may fluctuate during that time. If interest rates go down, more of the payment is applied to reduce the principal; if rates go up, more of the payment is applied to payment of interest. Variable rate mortgages may be open or closed.
A variable rate mortgage provides you with the flexibility to take advantage of falling interest rates and to convert to a fixed rate mortgage at any time.
Advantages of Variable Rate: when you have a variable rate loan it will follow the base interest rates. If the rates are low then this is a big advantage for you because depending on the lender you have it can make your base rates fall and this will help to reduce your monthly payments.
Disadvantages of Variable Rate:
Since your rates follow the base rates if they should rise then this means that your rates will also rise and in turn your monthly payments will be higher also.
Now that you know this important information you will have a much easier time of making your decision. Just make sure you take your time and do your homework and be smart by talking to a mortgage professional.
This is the smart way to decide what type would be best for you, fixed vs. variable. Just don’t rush your decision because making the wrong choice can cause you problems in the future that you don’t need.
For more info or to discuss your current situation call Vijay Gandhi: 647.267.6338
Vijay Gandhi, B.Sc., MBF
Mortgage Agent – Lic. # M10001947,
Centum Metrocapp Wealth Solutions Inc. – Lic. # 12147,
716 Gordon Baker Rd , 204 A, Toronto ON M2H 3B4
C: 647. 267. 6338 (Direct-Leave message or text)
P: 416.289.2224 | F: 888.813.9403
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