09 Oct Is Variable Rate Mortgage The Right Mortgage Type For You?

Posted at 13:02h in Mortgage Broker Surrey, Uncategorized by

Do you know what variable rate mortgages are? These are mortgage types in which the mortgage rate changes with the Federal Government rate cuts. With more than two consecutive years of rate rise, finally the variable rates are coming down with 0.25 basis points rate cut for the second time. 

Compared to variable mortgages, the rates for fixed rate mortgages are also lower, but won’t go any low with consecutive rate cuts. With the inflation coming down substantially, the Bank of Canada (BOC) is dropping the prime rates. To make the right mortgage rate choice, consider the following:

  • Fear of Missing Out (FOMO) – Fear of missing out on budget savings from a variable rate that may later go below a fixed-rate lock.
  • Joy of Missing Out (JOMO) – The joy of missing out the risk of higher rates by locking in a fixed rate and till you renew at lower market rates.

Why Opt For A Variable Rate Mortgage?

Some advantages of the variable rate type include:

  • If you pick an adjustable rate mortgage (ARM), each variable rate cut by the Bank of Canada will provide immediate budget assistance.
  • If you have a fixed-payment variable rate mortgage (VRM) with a bank, your amortization will decrease with each rate decrease, allowing you to pay off your mortgage faster.
  • Variable rates save homeowners more money throughout the term of their mortgage.
  • Variable rates provide more flexibility, including the opportunity to lock in a fixed rate at any time without penalty.
  • If you decide to move lenders, you will pay a lower penalty than you would with a fixed-rate mortgage.

The bank prime rates are already down 0.75% from their top of 7.20% and experts believe that the rates will fall by 1.0% to 1.5% from their peak into the start of next year.

Which Rate Option Should You Choose- Fixed or Variable? 

Though the rate cuts are coming along in the favor of mortgage holders, still variable rate isn’t for everyone. For most first homebuyers, the preference is set it and forget it, which is possible with fixed rate mortgages. Also, fixed rates allows homebuyers to set a budget and payment strategy over the amortization period.

A low short-term fixed rate could help close the uncertainty gap. If variable rates appeal to you and you have decisions to make in the near future or extra money to put down on your mortgage, variable rates can provide you with all of the flexibility you require.

However, open variable rates tend to be higher than standard rates because of the increased chance of mortgage adjustments. If you are looking for a reliable mortgage broker in Surrey who can help you make the right mortgage rate type choice, rely on none other than Satbir Bhullar Mortgages. With years of mortgage experience, we can not only help you make the right choice but also help secure a competitive rate deal that meets your budget and expectations. For more details, give us a call today.

 

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