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Variable-Rate Mortgages
What Is A Variable-Rate Mortgage?
Dynamic, flexible, and exciting — variable-rate mortgages give borrowers the chance to take more control over their payments. Does “going with the flow” come with some risk? Sure. But there is no better way to pay the lower interest than choosing a variable-rate — if the prime rate goes down, that is. If you’re interested in the current variable mortgage rates or simply want to find out our eligibility, contact me anytime. If you’d like to learn more about what makes variable-rate mortgages so adaptable and determine if it’s the right type of mortgage for you, read on.
How Do Variable-Rate Mortgages Work?
Variable-rate mortgages are based on one principle: your home loan interest rate changes based on the prime rate, which is a rate determined by banks and lenders. If the rate goes up, so do your payments, but if it goes down, you can see big savings. There is another key feature of a variable-rate mortgage: you can swap to a fixed-rate mortgage during your term if you decide you’d like to “lock in” a rate after all. This type of mortgage offers maximum flexibility, but carries some risk.
How Do I Decide If A Variable-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. Variable-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 Variable-Rate Mortgage
Flexible
You get to take control over your loan and adapt it to the changing market trends, rather than being restricted to certain limitations during your mortgage term.
Potential Savings
If the prime rate goes down, you can see significant savings on your loan, as you’ll pay less interest overall.
Convert Anytime
At any point, if you want to make the shift, you can swap to a fixed-rate mortgage and “lock in” a rate for a determined mortgage term.
Drawbacks Of A Variable-Rate Mortgage
Unpredictable
It’s impossible to fully predict whether the prime rate will go up, hold, or go down, so you carry some risk.
Principal Impact
Should your rate go up with the prime rate, you will be paying more towards your interest payments and less towards your principal, which may extend your mortgage amortization period.
What Is The Alternative To A Variable-Rate Mortgage?
While variable-rate mortgages offer flexibility and potential savings, fixed-rate mortgages can give you security and predictability — helping you budget better. If you want to avoid the risk and uncertainty of a variable-rate mortgage, you may be interested in the stability of a fixed 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.