The Mortgage Dilemma: Fixed or Variable?

Home buyers these days not only have to find the right property, but they also need to make a difficult decision with regards to their mortgage: fixed rate or variable rate?

It's a real dilemma for many because both fixed and variable rates at this time are very low. The challenge comes when looking ahead and trying to forecast where the rates will be a few years from now.

The argument for a fixed rate is that the economic recovery brings about higher mortgage rates. Therefore, why not lock in today's rate for 10 years? If this is your thinking, you can expect to negotiate a mortgage at around 2.99%.

A variable rate, however, is even cheaper. Much cheaper in fact—a good mortgage broker should be able to offer you Prime minus 0.1% or even lower still. The critics of variable rate mortgages will always point out that yes, they are lower now, but within a year they will “skyrocket. They will further point out that one can lock into a fixed rate mortgage without discharge penalties.

For buyer torn between these two options, how about borrowing 50% of your mortgage at a fixed rate, and the other 50% at a variable rate? These are called ‘hybrid mortgages’ and let you diversify your ‘rate risk’ by locking in part of your mortgage into a fixed rate, while the other parts may float at a variable rate. While not usually offered by the major banks, I work with a lender who offers this as a solution. A very sensible way to elimination hesitation and reduce risk.

Interested? Then please contact me for more details.”

Vasko DeLev, AMP
Verico Capital Mortgages Inc.
106-18 Deakin St, Ottawa ON K2E 8B7
Direct Line: 613-882-76-3
Fax: 613-228-2555
Email: vasko@CapitalMortgages.com