Variable Mortgage vs. Fixed Mortgage

Having a say in what type of mortgage you want is always a good thing. Here at Centum Bank Street Mortgage - located in Ottawa, Ontario Canada - our job is to make sure you're well aware of all the options available to you.

Let's focus on two of the main types of mortgages you may be dealing with now or in the future; fixed mortgages versus variable mortgages.

The main difference between the two types of mortgage loans is that a fixed mortgage loan maintains the same interest rate and monthly payments for the duration of your amortization. A variable mortgage loan, however, increases and decreases in interest in accordance with the rise and fall of the Canadian market interest rate, otherwise known as the prime rate.

Fixed mortgage rates are generally qualified differently based on terms. For example, for the 5-year term, the mortgage rate is based on the current rate of that time. If you decided to take a 1-4 year term, the mortgage rate would usually have to qualify on the posted 5- year rate. A fixed mortgage rate always means that every term would have a different rate based on the Bond rate and can vary anywhere between 1 to 10 year terms. Our recommendations of the fixed mortgage loan is based on our client and on how long they plan to have the mortgage for as well as how long within that time they would like their mortgage to be closed or fixed at the certain rate. Fixed mortgage loans are ideal for those who want to know the amount they will be paying each month and for how long without any surprises.

Variable mortgage rates are based on the Canada prime rate, which means they can increase and decrease based on the Bank of Canada. Variable mortgage rates can also be qualified on the 5-year posted rate at the time of the mortgage and can be switched over to the fixed mortgage rate for whatever the fixed rate is of the time. However, you can never go from an initial fixed mortgage to a variable one. Essentially, the way that a variable mortgage loan works is that every lender decides what they want to give as a variable rate and depending on The Bank of Canada, the rate can go up and down based on economic reasons. Variable mortgage rates are known to save clients money over time, but can be riskier based on the unpredictable rise and fall of the bank of Canada's prime rates.

Now that you know a little something about the different mortgage routes you can choose to take, the next step is to sit down with a Centum Bank Street Mortgage agent in Ottawa for the best advice. We can provide you with the professional consulting you need to make sure that route leads you to the proper destination. After all, nobody likes getting lost.