Variable vs Fixed, 2015 edition

Variable vs Fixed, 2015 edition

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As the overnight rate drops .25%, likely due to the decline in oil prices, all mortgage holders and people looking to get into the market are wondering how that is going to effect the variable and fixed rate. Well, as of today neither the Bank or Monoline Lender have reduced their Prime rate. TD has stepped out and stated that they will not be changing their Prime rate from 3% even in everyone else makes the shift. But honestly, why would they?! We are currently experiencing the lowest interest rates of all time and therefore Banks and Lenders are already making close to nothing on lending you their money. But thats not whats important to the consumer. The consumer wants to know whats the best mortgage option for them and how are they going to best save money and pay down their mortgage ASAP. Great question! Here we go.

Fixed rates – We could see Fixed rates drop to an all time low. I have been seeing the rate of 2.69% being thrown around throughtout articles posted. Thats an extremely low rate, and to have it for the next 5 years would be very advantagous as one would assume rates are bound to increase eventually.

Varaible rates – Also extremely low. Some lenders are offering Prime – .7%. That’s an interest rate of 2.3%. But, as you may know the variable rate comes with the risk of Prime changing, and your rate and payment therefore shifting. Maybe for better or worse. If you’ve decided to go with Variable, prepare yourself that your payments may increase or decrease overnight. Hopefully though, you’ve decided to work with an Ace Mortage Broker like myself that will keep you up to date with whats going on  in the industry and if Prime is likely to change. And the beautiful thing about a Variable rate mortgage is that you can switch from the Variable to Fixed at any time and FREE of charge.

Stratagies from me to you. – As simple as I can make it.

Stratagy #1 – Go fixed, its safe, reliable and you’ll know exactly how much is coming out of your account each month and therefore can budget your life around it.

Stratagy #2 – Go Variable, work with a comptitent Mortgage Broker that will let you know when Prime is going to increase, then switch to fixed. Historically the variable rate has remained lower than fixed and why not take advantage of the low interest rate while you can. Think of it as a sale on mortgages. You wouldnt give up the opportunity to buy something you really want on sale would you?

Stratagy 2.0# (only read this if your looking to be a mortgage mastermind) Go with the Variable rate, but pay as though your making fixed rate payments. This way you’ll take advantage of the low interest rates, pay down your principal more aggresively and then when you need to switch into a fixed rate you wont feel the financial stress of paying more each month.

If you have any questions in regard to this article feel free to contact me. Im here to help.

 



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