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Is a Fixed Rate Mortgage or a Variable Rate Mortgage Better?

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When you’re looking at what kind of mortgage you want, you’re going to want to understand what your options are; this is when you’re going to talk to one of our Toronto mortgage brokers. We’ll be able to help you figure out which type of mortgage is right for you. Here we’re going to talk about the differences between a fixed rate mortgage and a variable rate mortgage. Just because they sound the same doesn’t mean they are, so it’s important to make sure that you’re getting the best one for you.

What are Fixed Rates?

Fixed rates mean that the rate of interest is fixed over the term of the loan. This can change however if you don’t keep up with payments or you hit one of the contingencies in the loan (like paying early). So even if you’re offered a fixed rate mortgage, you’re going to want to be careful about how it’s structured so you’re getting a good deal. It’s also important to note that a fixed rate mortgage will usually start out with a higher interest rate than a Canadian variable rate mortgage; if done right you’ll get a lower rate of interest over the life of your loan. Speak with a Toronto mortgage broker like us before you choose this kind of mortgage.

What are Variable Rate Mortgages?

Canadian variable rate mortgages are mortgages with interest rates that aren’t fixed. We as Toronto mortgage brokers will offer these to you alongside fixed rate mortgages. Low interest rates are forecasted to last through 2014, so you’ll have awhile to pay down as much principal as possible.

You’ll want to pay attention to something known as the “caps” in your mortgage paperwork. An annual cap will be the amount of points that a mortgage can fluctuate each year. A lifetime cap is the max cap on how much higher it can go over the lifetime of your loan. So if you get a VRM at 5% now, and your lifetime cap is 6%, your interest rate should never go above 11%. You’ll want to speak with a Toronto mortgage broker to make sure that there are no caveats in the contract to make this higher.

What are Hybrid Mortgages?

Hybrid mortgages generally start off as a fixed rate mortgage and slowly convert over to a variable rate mortgage over time. These will get you big savings on your interest rates over time, but they can balloon to a high interest rate when they convert to a variable rate mortgage. You’ll want to make sure you’re very careful about taking a Canadian hybrid mortgage. This is why you’ll want to speak with one of our Toronto mortgage brokers to make sure that you’re making the right choice for you.

There are many kinds of mortgages, but there is only one right solution for your needs! Let us help you find it today; why pay more than you have to?

Should You Convert Your Variable Rate Mortgage to a Fixed Rate Mortgage?

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If you currently have a variable rate mortgage, or an ARM, you may be wondering if it’s time to get a better deal. If you want to know what’s right for your situation, you need to speak with one of our Toronto mortgage brokers. We’ll be able to help you understand if a refinance is right for your situation, and how you can get one. There are so many different ways that you can get a better loan if you can fix your terms, so it’s always worth a look to see if it’s the right thing for you.

What is a Variable Rate Mortgage?

Variable rates, or adjustable rates, are a kind of interest rate term. Variable means that it will float up and down with the Prime Interest Rate set by the Bank of Canada (and other national banks in other countries). Interest rates right now are quite low, but if you negotiated the terms of your agreement before they were low it may be time to renegotiate. Whatever you do, you’ll want to make sure you speak with a Toronto mortgage broker to find out what your options are.

What is a Fixed Rate Mortgage?

Instead of a mortgage that floats up and down with the economy, a fixed rate mortgage stays fixed; this can change if you default on your payments or pay late and with other conditions that will be in your mortgage contract. By and large a fixed rate mortgage is the kind of mortgage that you want to get. You can change your ARM to a fixed rate or your fixed rate to an ARM. Speak with one of our Toronto mortgage brokers to see what kind of deal you can get if you want to refinance your mortgage.

Should You Convert?

If you want to be able to save more money every month and pay off your mortgage faster, converting to a fixed rate mortgage can be the ebst thing to do. Not everyone will reap the benefits of this kind of switch though, so it’s important to understand your options. Some people will benefit from this kind of a conversion. Right now interest rates are the lowest they’ve been in decades; interest rates should hold steady through 2014 but beyond that no one knows for sure. With a fixed rate mortgage your mortgage will remain fixed at that interest rate (so 5% for example for the next 30 years). You’ll be able to use more money to pay off your mortgage faster and spend less on interest payments.

How do You Convert Your Mortgage?

The first thing you’re going to want to do is speak with one of our Toronto mortgage brokers. We’ll be able to help you evaluate your situation, helping you to understand what is right for you. Some people can benefit greatly from converting their mortgages, others are better off keeping things the way they are. Speak with one of our Toronto mortgage brokers to find out how a mortgage conversion could help you save money today!

How Do Variable Rate Mortgages Work?

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variable rate mortgagesThere are many different kinds of Canadian mortgages on the market, and one of the most popular is a variable rate mortgage, also known as an ARM. ARMs, or adjustable rate mortgages, aren’t sitting at a fixed rate. They can go up and down throughout the life of your loan, and you could wind up with extraordinarily low interest rates or extraordinarily high interest rates (it’s usually the latter). It’s important to make sure that from the start you can get the right terms for your mortgage; this is why you want to talk to one of our Toronto mortgage brokers to get the best deal for you.

Always Adjusting

A variable rate mortgage is constantly adjusting throughout the year to make the most of the mortgage. This isn’t to make the most of it for you, but for the lender. Mortgage lenders only make money off of interest, and the interest needs to be at the maximum amount over the life of the loan to maximise the profit of the lender. There are Hybrid ARM loans that will remain fixed at the beginning of the term (for the first 10 years for example) but then they switch to an ARM that can go sky high. No one can predict the future and you can only hope that the prime interest rate remains low.

How a Variable Rate Mortgage Affects You

If you have a variable rate mortgage, it can affect you positively or negatively; how it will work over the life of your loan will depend on the terms you were granted at the outset. This is why you need a knowledgeable expert on your side to make sure that the loan conditions are fair and equitable.

There is something known as an “annual cap” which will cap how much your interest rate can fluctuate up or down over the course of a year. The “lifetime cap” affects how much your interest rate can fluctuate up or down over a lifetime. Both of these can easily effect whether or not the loan will be favourable for your situation. The standard for an ARM or variable mortgage will be about 6%, but it can go lower and higher depending on what kind of credit score and income you have.

But when the annual interest rate swings up and down, you’ll notice it in your monthly payments. More of your payment will go towards principal (original amount borrowed) when it’s lower, and more will go towards interest when it’s higher (if you pay the minimum payment).

We’ll help you compare many different lenders to make sure that you’re getting the best terms possible. We’ll help you figure out what your monthly costs will be for your mortgage and what you can expect to pay over the life of the loan, not just the number you’re borrowing. We’ll help you see the whole picture before you borrow, so you can get through the process with zero surprises. If you’d like to learn more, speak with one of our Toronto mortgage brokers today!

Is a Variable Rate Canadian Mortgage Right for You?

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variable rate mortgagesEveryone talks about the evils of a variable rate mortgage (also known as an ARM or adjustable rate mortgage), but few will go over the benefits of one. You shouldn’t just get a fixed rate because that’s what you’re supposed to do. You need to know what kind of financing will help you get the right financing for your situation. Here we’re going to go over everything you need to know about variable rate Canadian mortgages and if they’re right for you. We’ll also talk about the role that Toronto mortgage brokers play with finding the right lender, so let’s get started.

Why Do You Need a Mortgage?

If you want to buy a home, or refinance a home you already own, you may need a mortgage. Refinancing allows you to send your children to university (or build up a nice fund for them), but it also helps you to pay off your debts and increase your home’s worth. There are many other ways you can use a mortgage; some of them much more fun and irresponsible than the above! But you’ll want to be careful when you borrow against your home, so only borrow what you absolutely need.

What is a Variable Rate Canadian Mortgage?

Instead of having a fixed rate through the life of your loan, your rate can bounce up and down with the prime. Prime interest is what you usually hear about on the news (as of writing it’s settling around 5% which is insanely low). If the economy stays well, as it should for the next few years, your interest rates will stay low. If you only need to borrow x amount of money that you can pay back within a few years, an adjustable rate may be better for you than a fixed rate. Not everyone needs 30 years to pay off their mortgage, and if you get the wrong kind you may even be penalized for trying to pay off your mortgage early. While Canadian mortgages do have a better track record compared to other countries (America in particular), it’s important to make sure you’re getting a good interest rate.

Why You Need a Mortgage Broker

When you go to your lender, they sit you down. Maybe they’ll get you a soda, maybe they’ll offer you a snack. It seems friendly until they bring up the subject of interest. To a lender, interest is the money maker. The money they initially loan you doesn’t mean much to them, but getting $10,000 a year for the next 30 years is a good bet. You need a mortgage broker to help you get the best rate. In the beginning is where you have the most control, so don’t allow your lender to give you a bad rate. Hire a Toronto mortgage broker to help pair you with the right mortgage lender so you can get a variable rate Canadian mortgage that you can live with!

Are Mortgage Rates Heating Up?

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Some are worried that the Canadian real estate market is slowing down, some are worried about a bubble; but one of the biggest worries on the minds of most home owners and home buyers is if the second mortgage on their home is what will financially ruin them. Here we’re going to go over what’s going on with interest rates, if you should choose a fixed or variable rate mortgage and if the golden age of cheap borrowing is over.

According to a recent CBC article, mortgage brokers have been receiving an influx of new business due to worries about interest hikes. For the last 15 years consumer debt loads of Canadian households have been growing and many people surveyed are just an interest point away from being able to afford their mortgage or losing their homes.

Mortgage Brokers Help

Navigating the tricky road of getting the best deal on your first or second mortgage isn’t something you should ever do alone. If you now have or are considering a variable rate mortgage, you should seriously think about changing it to a fixed rate mortgage. Right now interest rates are extremely low but with a variable rate mortgage you could run into insanely high rates later. A Toronto mortgage broker will help you get the best rate for your situation and needs.

Buying a New Home?

Mortgages are one of the biggest hidden costs of buying a home; before you buy consult with a mortgage broker so you lock in a good rate that doesn’t make your first home buying experience punative!

Rates Matter

With the Bank of Canada predicted to raise interest rates by the end of the year, if you already have private mortgages or are about to get a second mortgage, you need to lock in your interest rates now. If you have a ten year mortgage, for example, and you lock it in at less than 4% now you’ll be able to enjoy that rate even when interest rates rise.  If you have a 25 year mortgage, you’ll be able to keep that rate going for years. Since rates are at the lowest they’ve been in decades  and probably will be again, fixed rate mortgages are the way to go.

For years variable rate mortgages were considered the wise option; now with nowhere for rates to go but up, fixed rate is where you should renegotiate or start. But if you don’t renegotiate your mortgage down with an experienced Toronto mortgage broker, what’s the worst that can happen?

Is One Percent That Much?

The CBC conducted a recent survey of home owners with mortgages about interest rates; the majority of those polled said that a 1% interest hike would leave them choosing between paying their mortgage and groceries each month. It’s a grim thought, but are you secure in your mortgages? If not, a mortgage broker can help you get the best rate on your first or second mortgage. Do your research and find 

Don’t Expect to Get Discounts on Variable Rate Mortgages Any Time Soon

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According to a latest Financial Post report, discounts on variable rate mortgages are fast disappearing. At a time when interest rates are at record lows, investors have been capitalizing on these discounts for a while now.

But discounts have been few and far between over the last couple of weeks, and almost all the major banks have stopped offering them. As banks’ borrowing costs are rising, they have put a stop to interest rate markdowns, a reality that investors will have to make peace with. Some are already moving to fixed rate mortgages as discount offers dry up and a fear that premiums on variable rate mortgages could rise above the prime rate looms.

Variable rate mortgage rates are tied to the prime rate. With a majority of the financial institutions keeping their prime rate offer at 3 per cent, a discount has translated into a bonanza of sorts for borrowers. It is not difficult to fathom why investors have been increasingly opting for variable rate mortgage products – with the discount, they are walking away with rock-bottom interest rates of 2.1 per cent! CAAMP (Canadian Association of Accredited Mortgage Professionals) says that more than 30 per cent of consumers picked variable rate mortgages last year.

Mortgage advisers who were telling their clients to opt for variable rate mortgages over the last decade are now recommending their fixed rate counterparts. The stability offered by fixed rate mortgage products in the present low interest environment makes them affordable.