In the past prospective home buyers turned exclusively to their bank for their mortgage needs, but you now have more options at your disposal with the growing presence of mortgage brokers. Mortgage brokers are becoming more popular as we have access to multiple lenders and mortgage rates. In addition to having access to the major banks, mortgage brokers also have access to other provincially regulated and private mortgage lenders. Those lenders include Credit Unions, Monoline mortgage lenders and private lenders. Choice allows us to ensure the features of the mortgage are aligned to the our clients needs. We shop the market for you to secure the best overall cost of borrowing for your unique needs. We also access exclusive deals not available on the open market. Our volume discounts are passed directly to you so we always offer our best rates upfront.

We have access to, and knowledge of, the entire mortgage market. We know which lenders will consider your case so it will save you time and give you peace of mind when trying to find a lender. Banks can only access and offer their own rates and products, which may not be the best option for you.

By working with a licensed mortgage professional, you have a trusted advisor and problem solver, who is best positioned to navigate these changes and present options. As the lending environment changes, brokers keep up to date with all these changes and have access to a variety of lenders.

No one is more knowledgeable and more informed than we are.

With the recent bank wars placing variable rate mortgages at Prime -1.00% the question about whether a fixed or variable rate mortgage has come up again and again. While fixed rate mortgages are starting to rise they offer certainty in a monthly payment. On the flipside, variable rate mortgages remain low, but are the riskier of the two mortgage choices – so what do you choose a fixed or variable mortgage?

The appeal of variable rate mortgages, also called VRM and adjustable rate mortgages, is that the interest rate is typically lower than that of fixed rate mortgage products. However, the main drawback is the risk involved. Without warning, interest rates could increase or decrease.

One of the quickest ways to determine if a variable rate mortgage product is right for you is whether or not you can afford interest rate increases. Speaking with your broker can help you determine whether or not you can afford these increases or not.

If you’ve decided you can afford a variable rate mortgage, the next thing you will want to determine is if a variable rate mortgage fits your personality. If you’re the type of person who can’t sleep at night knowing your interest rate may go up, even slightly, a variable rate mortgage may not be the best option for you.

One thing you can do to mitigate risk and reap some rewards of choosing a variable rate loan product is to fix your mortgage payment at a set amount higher than the minimum requirement. This would help if rates DO increase your payment would stay the same, the only part that would adjust would be the amount that go towards principle and interest. If you set your payments to what a five year fixed rate payment would be, you’d have to withstand several rate increases before you’d notice a payment change. With this buffer in place you’d also be allocating more of your payment towards principle, in turn paying down your mortgage faster.

The popular choice

Five-year fixed products have historically been popular in Canada, for some, the decision to choose a fixed rate mortgage product is a no-brainer.

If there’s a particular rate and payment you feel good with and know you can afford, then most people will prefer the peace of mind. We’ve had some very good five year fixed rates in the last couple years (hello 2.45% five year fixed of last summer!).  If you’re not wanting any surprises and are willing to pay slightly more for the assurance (or insurance) that there will be no increases in your payment then the fixed rate is for you.

Even though a variable rate mortgage will be cheaper at the time of closing, and may even fall further over time, the issue here is risk of the unknown. And as rational beings, the majority of people are risk-averse…they want to be able to sleep well at night.

Verdict?

There’s no doubt that variable mortgages expose you to rate risk. Your costs are lower today, but they could rise as far as the current higher-rate trend takes them. You can always lock into a fixed rate later on, but timing that right won’t be easy.

Think about lifestyle as well as finances when choosing a mortgage. If there’s a serious chance you’ll break your mortgages, the penalty in a variable-rate mortgage is simply calculated and often much cheaper than a fixed-rate mortgage.

Overall, only you can decide which option suites your family best. Having a frank discussion about your finances and financial goals with your Mortgage Broker will help you make the decision that’s right for you!

Call Jill at 780.872.2914 to discuss your options today!