You’re mortgage shopping and looking for the lowest rate possible – good idea? The answer is… yes and no.
Although you should be looking for a low rate on your mortgage, you also need to consider the terms that come with it. Your mortgage rate will be reflective of whether you’re in a variable or fixed-rate term.
What’s important is that you understand the difference before you choose. At the end of the day, the decision is yours – but we’re here to provide advice that best suits you and your financial situation!
Variable rate
- If interest rates go up, there is no heads-up. Therefore, your mortgage payments may increase significantly at the drop of a hat. On the flip side, if interest rates go down, your mortgage payments will also go down.
- Variable mortgage rates can be unpredictable for budgeting and this may present itself as a problem in the future for you.
Fixed rate
- There’s consistency and reliability in a fixed rate because you know the exact amount you’ll be putting down on your mortgage for each payment over the number of years you decide on.
- If there’s a significant difference between the variable and fixed rate, you’ll need to evaluate if it’s worth it to pay more for the protection of a fixed rate – if the fixed rate is higher than the variable rate at the time of signing.