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The AC Lending Weekly

To Fix or to Variable that is the question!

(Part 2)

In part 2 we sill be tackling the fixed side of things when it comes to rates. Fixed rates are set depending on what the current government bond yields are at plus a spread.  These yields are driven by various economic factors such as unemployment rates and inflation. If you were to take a fixed rate, that rate would be set for the duration of the term you choose.  You can choose anywhere from 6 months all the way up to 10 years for the term of the mortgage currently in Canada.

A fixed term is always a closed term. While you can get out of fixed mortgages there would be a corresponding penalty attached. Some lenders have special stipulations like the property must be sold which would mean you could not break the mortgage in order to refinance (This is another very good reason to get all the details of the mortgage prior to signing) The penalty could also be significantly greater depending on the which lender you go with and what product you choose. For example, banks usually have a higher penalty than mortgage only lenders. Fixed rates are usually bit higher than that of a closed variable term but on the flip side you do get the advantage of knowing exactly what rate you get for the term you chose.  The real upside is the peace of mind and ease of budgeting knowing precisely what your payments will be – set it and forget it!!

“You learn more from losing than winning. You learn how to keep going”

 Morgan Wootten

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