Fixed Rate Mortgages

This type of mortgage is comprised of a term, a fixed interest rate, a fixed monthly payment, and a set amortization period. It is the most common kind of mortgage in Canada. House buyers generally find the fixed-rate mortgage attractive because they can lock in the current interest rate for a term of up to 10 years at the time the mortgage is originated. This means that the interest rate cannot change during the term, which can be a real bonus should interest rates begin to increase later.  The main benefit of a fixed rate mortgage is the fact that an individual will not have to worry about fluctuating interest rates and increased loan payments.

Generally speaking, looking at history, borrowers would have been better off selecting variable rate mortgages because the interest rates on variable mortgage were significantly lower than fixed rate mortgages. However, this spread in interest rates between fixed rate mortgages and variable rates are today much closer.   

Borrowers need to understand the risks associated with variable rate mortgages.  In addition, in most cases variable does not mean open and borrowers are still committed to staying with the financial institution for a fixed term which in most cases is five years. 

Every individual and situation is different.  Borrowers should fully understand the benefits of a specific mortgage product, along with its risks and limitations.  Professional advice should be obtained, and in many cases mortgage agents and brokers can provide financial assistance and consultation. 

Some Advantages of Fixed Rate Mortgages

  • Individuals do not have to worry about interest rate fluctuations
  • Mortgage payments do not fluctuate monthly
  • It is easier to budget with fixed rate mortgages
  • If interest rates rise, individuals benefit from the locked-in rate
Some Disadvantages of Fixed Rate Mortgages
  • In most cases, the interest rate is higher at the time the mortgage is originated
  • If interest rates decrease, individuals do not get the benefit of lower rates

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Best Mortgage Rates

Variable Rate 1.94%
1 Year 2.34%
2 Year 2.14%
3 Year 2.44%
4 Year 2.49%
5 Year 2.49%
10 Year 3.84%

April 27, 2017

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