16 Feb Why You May Want a Fixed Rate Mortgage
Are you debating between a fixed rate and a variable rate mortgage? Which one is best depends on external factors like current interest rates and the state of the economy. Personal factors, like your comfort level with risk and your job situation, also play an important role.
But with today’s rock bottom interest rates, I think it just might be the right time to lock in your payments. Here are a few reasons you may want a fixed rate mortgage.
Fixed Rates Make it Easy to Budget
When you choose a fixed rate mortgage, you know exactly what your payments will be. Your mortgage professional will calculate your payment for you, and it will stay the same for the remainder of your mortgage term.
Fixed rate mortgages make budgeting much easier. You can ignore all of the chatter about interest rates in the news. Your payments stay the same, even if interest rates skyrocket.
The Difference Between Variable and Fixed Rates Is Small
When it comes to mortgage interest, fixed rates are historically higher than variable rates. But in today’s competitive environment, the gap is almost gone. At the time of writing this article, fixed mortgage rates are available for less than 3 per cent for terms of up to 5 years. Variable rates are in the same range, most within 0.1 to 0.5 per cent of the fixed rate (ratehub.ca).
Gone are the days of big rewards for taking on the risk of a variable rate. This small gap in interest rates makes it a good time to lock in that mortgage rate.
Protect Against Interest Rate Hikes
The biggest advantage of choosing a fixed rate mortgage right now is the protection it gives you against rate hikes. Since rates are at historical lows, they are bound to go up in the near future. Granted that may not happen for a few months, or even a few years, but there’s no way of knowing when they will go back to normal levels.
Instead of spending your time trying to predict what will happen next, it makes sense to lock in a low rate right now. If you get a five year, fixed rate mortgage at 2.8 per cent interest, for example, you are guaranteed that rate for the next five years, even if rates end up going through the roof six months from now.
Reduce Your Stress Levels
For many of us, having a fixed rate mortgage brings peace of mind. If the possibility of a hike in your mortgage payments stresses you out, a variable rate isn’t a good choice for you. A fixed rate mortgage can let you put your finances on auto-pilot. And it can let you sleep at night.
How Can You Lock In a Fixed Rate for Your Mortgage?
Even if your current mortgage isn’t due for renewal just yet, you still have options. Switching to a fixed rate mortgage might save you some money. Contact us today and we’ll be happy to review your existing mortgage. We’ll work hard to save you money!