Variable Vs Fixed

[vkesava1]

With current Market conditions, where the variable and fixed are at the same range around 2.84%, is it better to go fixed than variable.

is the interest rates going to increase in the coming months ?

Which is better ?

[Disoblige]

The 5 year variable rates are ~0.5% lower currently.

The interest rates will almost be guaranteed not to rise in the coming months.

Although if what Tim is saying is true and you could get 5 year fixed at 2.20% soon, that wouldn't be a bad option for some peace of mind. I don't know how much lower variable could go.

[ExtraSlow]

As always, variable vs fixed is a questions of risk. If you are in the position that a change in your monthly payments might ruin your financial situation, then fixed is right for you. If you are more able to absorb changes, than variable might be a nice choice.

Variable has a lower total cost over most time periods, but some people can't handle the stress and require fixed rates.

I've done fixed the last two times, and I haven't been too worried about it.

[mr2mike]

Variable. I mean I thought all beyonders have huge savings, under leveraged and can handle 5% interest rate hikes?

[SkiBum5.0]

^ you sound like a sore loser

OP, I'd work with a financial advisor or your mortgage broker to determine what is best for you. Run some "what if" calculations based on the interest rate dropping or rising.

[Strider]

Originally posted by vkesava1
With current Market conditions, where the variable and fixed are at the same range around 2.84%, is it better to go fixed than variable.

is the interest rates going to increase in the coming months ?

Which is better ?

Based on all of the questions you've been asking, you seem to be very new to the house buying / mortgage process and not terribly inclined to do your own research or critical thinking.

Instead of inundating the forum with posts, I would highly recommend making an appointment with one of the more than capable mortgage brokers who are forum sponsors. They can answer all of your questions relating to your own particular situation in private. They'll probably even cover a lot of questions that you didn't even think to ask.

[tpurcell4]

Right now the variable is offering a large amount of savings, yet, fixed rates have never been this low. You really can't go wrong either way. If you want to know your payments will not change for X many years go with the fixed.

The other thing to consider is qualifying. It is more challenging to qualify for the variable, however if you can, then put together a good plan to take advantage of the savings you will receive going with the variable and set your monthly payment higher at an amount you can comfortably afford, and pay the mortgage off faster, while building yourself a cushion when the prime rate does start to rise.

[Disoblige]

Originally posted by Strider


Based on all of the questions you've been asking, you seem to be very new to the house buying / mortgage process and not terribly inclined to do your own research or critical thinking.

Instead of inundating the forum with posts, I would highly recommend making an appointment with one of the more than capable mortgage brokers who are forum sponsors. They can answer all of your questions relating to your own particular situation in private. They'll probably even cover a lot of questions that you didn't even think to ask.

I was trying to think of a polite way to say this, but totally hit the nail right on the head. Solid advice right here, hope vkesava1 gives Tim or Todd a call.

[TimLacroix]

Originally posted by Disoblige
The 5 year variable rates are ~0.5% lower currently.

The interest rates will almost be guaranteed not to rise in the coming months.

Although if what Tim is saying is true and you could get 5 year fixed at 2.20% soon, that wouldn't be a bad option for some peace of mind. I don't know how much lower variable could go.

This would be nice but not sure that we will see 5 year Fixed rates this low...

[TimLacroix]

This is and always will be a HOT topic.

As Todd mentioned, the 1st and most important factor before deciding on Fixed or Variable... is whether or not you qualify.

The guidelines are that if a client takes a Term of 5 years for a fixed rate (or longer), they will qualifying at the contract rate.

If a client takes a Term less than 5 years or a Variable/ Adjustable rate, they must qualify at the BoC rate which currently is 4.79%.

Then it is a discussion and an analysis about your situation. Budget, life style etc...

Obviously with the fixed rate, the payments do not adjust and you can plan for the next 5 years. However, with variable it can be less certain and it still not for everyone. It is important to consider looking at putting in place a strategy to take advantage of the low rates if you take variable.

One such one is to set your payment as if you took a 5 year fixed... the extra amount goes straight to principal. Then if BoC rate rises, you can make another adjustment to maintain the spread... this strategy can take years off your mortgage, save thousands in interest but also protects you from payment shock at renewal.

Now, it should also be mentioned that this strategy works for fixed rates too... but keep in mind that there are other things to do that are beneficial instead of focusing solely on your mortgage...
pay down debt (higher interest)
invest (to increase wealth)

Find a strategy and balance that meets you and your family goals. Variable it not for everyone... let us know if you have questions. ~Tim

[Disoblige]

Originally posted by TimLacroix


This would be nice but not sure that we will see 5 year Fixed rates this low...

But in your other thread you said:

Originally posted by TimLacroix

Based on this, we should see 5 year fixed rates around 2.20% or so...

Was I misunderstanding something?

[TimLacroix]

Originally posted by Disoblige


But in your other thread you said:


Was I misunderstanding something?

In my thread we said we SHOULD see 5 year fixed rates around 2.20%... but the lenders are probably not going to go down this far.

The typical spread is about 1.50 to 1.70% above the 5 year bond yield... this gives you an idea of where 5 year fixed rates usually get set. But with the margin this large... it is unlikely that lenders till drop this low...

[Black Gts]

I misunderstood that as well and made a couple phone calls to get my ducks in a row if that happened lol. I think my penalty would be to high to do what I wanted anyways, but you had me dreaming large this am.

[TimLacroix]

Originally posted by Black Gts
I misunderstood that as well and made a couple phone calls to get my ducks in a row if that happened lol. I think my penalty would be to high to do what I wanted anyways, but you had me dreaming large this am.

Oh boy. Sorry for the confusion. It would be pretty amazing if it got that low but not so sure where it might get too. We could see more promotions in the next week or two.

[Black Gts]

It's all good like I said I wanted to be ready to re finance a full point lower, no harm no foul I wasn't expecting it overnight, it just got me thinking, you may have led me to other possibilities though so thanks I guess haha.