A variable-rate mortgage is a mortgage whose interest will fluctuate over time. This is based on the Bank of Canada’s prime rate. Unlike a traditional bank, the Bank of Canada is not a commercial company and doesn’t provide services to the public. Instead, its role is to “promote the economic and financial welfare of Canada”.
Benefits of a Variable Rate Mortgage
Historically, variable-rate mortgages tend to have lower interest rates than a fixed-rate mortgage. Another benefit that you can take advantage of is that if you can pay more than the interest rate %, you can add the additional dollars to paying down your principle.
A fixed-rate mortgage refers to the interest rate, which stays the same over the term of the mortgage. Once locked in, the interest rate does not change with market conditions. This means that if you get a low-interest rate (such as now in our post-pandemic time), you will keep that same low rate even if interest rates increase over time.
Benefits of a Fixed Rate Mortgage
A fixed-rate mortgage is great for those who are looking for a consistent payment each month. This allows you to properly budget and plan your finances. Due to the stable nature of fixed-rate mortgages, they can also give you security and peace of mind that during your term, your payments won’t fluctuate.
Learn more about Variable Vs Fixed Rate Mortgages with Mortgage Design Group. If you’re looking to get a mortgage, speak to one of our mortgage brokers today!