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Fixed-Rate Mortgages
What Is A Fixed-Rate Mortgage?
Simple, predictable, and popular — fixed-rate mortgages make up the vast majority of mortgages in Canada. For many people, the idea of “locking in” a rate for a mortgage term offers stability and straightforward budget planning, even if the larger economy and prime rate change during that period. If you’re interested in the current fixed mortgage rates or simply want to find out our eligibility, contact me anytime. If you’d like to learn more about what makes fixed-rate mortgages so popular and determine if it’s the right type of mortgage for you, read on.
How Do Fixed-Rate Mortgages Work?
The core principle behind fixed-rate mortgages is that, for the duration of your mortgage term, your interest rate will not change. This means that, every month, your payment stays the same, with a portion of your payment going towards the interest and the principal. Even if the prime rate, which is a rate determined by banks and lenders, fluctuates during your mortgage term, your rate will not change. When your mortgage term is up, however, you will renew your mortgage based on the rates on offer at that time.
How Do I Decide If A Fixed-Rate Mortgage Is Right For Me?
As with many other aspects of a home loan, the type of rate you choose is based on your income, lifestyle, and preference. Fixed-rate mortgages are no better or worse than the alternatives, as there are both pros and cons that may influence your decision.
Benefits Of A Fixed-Rate Mortgage
Predictable
Planning out your housing budget is easy with a fixed-rate mortgage, since your monthly mortgage bill won’t change throughout your mortgage term.
Secure
If rates go up during your mortgage term, your payments remain protected and unaffected.
Boring (In A Good Way)
It’s no joke — there is a simplicity in a basic and boring fixed rate mortgage, as it takes the stress out of monitoring the prime rate and worrying about possible impacts to your affordability.
Drawbacks Of A Fixed-Rate Mortgage
Higher Cost
It’s possible that, depending on the prime rate changes during your term, you may end up paying more over the long term with a fixed-rate mortgage.
Restrictive
If interest rates do go down during your term, you’ll miss out on potential savings — not to mention the penalties in place for renewing your mortgage early.
What Is The Alternative To A Fixed-Rate Mortgage?
Where fixed-rate mortgages offer stability and consistency, variable-rate mortgages can give you flexibility and possible savings — albeit with a bit of risk. If you want to be free from the constraints of a fixed-rate mortgage, you may be interested in the dynamic potential of a variable rate.
Contact Me
The Best Mortgage Rates Are Here
Do you have questions about your mortgage eligibility? Or, maybe you’re ready to apply for a mortgage or get a mortgage quote? Contact me anytime via call, text, or contact form. Find out why so many people trust mortgage agents to handle their home loans.