No matter how many times we talk about it leading up, when we are ready to proceed with the final approval, I ask the question so fixed or variable? And usually the response is still what would you do? Over the next few weeks we will compare the 2 and give you pros and cons on each one, today we will tackle the different elements that may come into play when deciding to fix or to go with the variable term.
We are at a point here with fixed rates at record lows why not lock in?. When I approach this debate with my clients it truly comes down to their situation. How will a rate increase effect their budget? Are they first time home buyers? (Sometimes it is a good idea to lock in as they don’t truly know all the additional costs that come with home ownership). Are they risk adverse? (Setting up a strategy similar to your investment portfolio is a good idea, spread the risk out or if you are risk adverse might be a good idea to lock in regardless of rate).
Will you be losing sleep over possible rate increases? There is something to be said for peace of mind; You could also have a strategy in place, if the payment is lower with one of the options (This would usually happen with the variable side) but if you are comfortable with the higher payment maybe take the variable term and make your payment the same as it would be with the fixed term, now you would be paying your mortgage down faster. Is this an investment Property? Each client is different and them being knowledgeable about the positives and negatives of each product is key. Either way with rates at the level they are now I don’t think you can make a bad decision! Feel free to contact me if you have any other questions/concerns. (Next week we tackle fixed rates how they are set and some pros and cons to help your decision process a bit easier).
“I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. 26 times, I’ve been trusted to take the game winning shot and missed. I’ve failed over and over and over again in my life. And this is why I succeed”