Fixed vs Variable Rate Mortgage - What's The Better Choice and Why?

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Cameron Wilson embodies excellence with his commitment to precision and truth.

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Fixed vs Variable Rate Mortgage - What's The Better Choice and Why?
Fixed vs Variable Rate Mortgage - What's The Better Choice and Why?

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In today's market, fixed and variable mortgage rates are close, but variable rates offer potential savings and flexibility. While fixed rates are seen as safer, variable rates provide the option to lock in at any time and have historically saved money over the long term. Learn about the benefits of variable rates, including lower penalties and manageable rate increases, to make an informed decision for your mortgage needs.

In today’s market, variable and fixed rates are not too far apart. This makes most people think that the fixed rate is the way to go as it’s often viewed as the safest option.

Many believe that variable rate mortgages are for the daring and at any time your rate could double leaving you high and dry in the cash flow department. Many don’t realize that isn’t the truth at all.

The great thing about a variable rate is you have the option to lock into a fixed rate at any time you start feeling panicky, but I can assure you your interest rate will not be doubling over night. Even if your rate did go up by .25% the savings you would have already earned would put you on level playing ground, or you’d possibly still be in the lead.

Over the last 40 years variable rate mortgages have proven themselves to be the better choice for saving money and flexibility.

I would also say that you’ll be given ample warning in the news and media that the Bank of Canada is planning a move on rates. When the rate does increase, I’m certain it will be slowly creeping up with just a quarterly rate increase at a time.

Where you’ll save the most money choosing a variable rate compared to a fixed rate is with the penalty.

With a variable rate, you’ll only ever be charged 3 months interest at any given time you choose to break your mortgage during the term. With a fixed rate it’s always the greater of Interest Rate Differential (IRD) or 3 months interest, and believe me those IRD penalties can be insanely large!

Statistics show that the majority of Canadians break their mortgage before the 5 year term is up, so save yourself some dough and consider going variable. There’s more to it than just the lower rate…and as an independent mortgage agent, I can show you many mortgage options to fit your specific needs.

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A note

From Cam Wilson:

Wilson Mortgage is proud to partner with Dominion Lending Centres, one of Canada’s most trusted mortgage networks. This partnership allows us to offer our clients a wide variety of mortgage solutions tailored to their unique needs. Whether you're looking for competitive rates, flexible terms, or specialized financing options, our access to Dominion Lending's extensive resources ensures that you receive the best possible service. Serving the Niagara Falls and St. Catharines area, we combine local expertise with the strength of a national network to help you achieve your home financing goals with confidence and ease.