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Fixed or Variable That is the question !!

2009-10-28 | 11:15:22

Fixed Rate or Variable Rate

The decision to choose a fixed or variable rate is not always an easy one. It should depend on your tolerance for risk as well as your ability to withstand increases in mortgage payments. You can sometimes expect a financial reward for going with the variable rate, although the precise magnitude will ebb and flow depending on the economic environment.

Fixed rate mortgages often appeal to clients who want stability in their payments, manage a tight monthly budget, or are generally more conservative. For example, young couples with large mortgages relative to their income might be better off opting for the peace of mind that a fixed-rate brings.

A variable rate mortgage often allows the borrower to take advantage of lower rates -- the interest rate is calculated on an ongoing basis at a lenders’ prime rate minus a set percentage. For example, if the prime mortgage rate is 5.5 percent, the holder of a prime minus 0.5 percent mortgage would pay a 5.00 percent variable interest rate.

As a consumer, the best option is to have a candid discussion with your mortgage professional to ensure you have a full understanding of the risks and rewards of each type of mortgage.

Renegotiate or Not!!

2009-10-28 | 11:08:17

With Mortgage rates continuing at historic lows, should I or shouldn't I ??? The answer is clear, maybe.

A lot depends on the type of mortgage and the penalties involved as to whether the savings will cover the interest differential or pre-payment penalty. Currently mortgages that are 3 years or older fall into the 3 month penalty and considering the time these mortgages were placed, if 5 years ago, rates were significantly higher and even with a penalty the decision would fall in your favor and therefor make sense.

The reality is that this decision is on a case by case basis and knowing what your terms currently are, what your penalty would be if you were to pay out now, we could  calculate the benefit or lack of, worse case scenario, you'll have piece of mind knowing which decision is right for you.. Best case scenario, you could save yourself a lot of money...