In Ontario, a fixed mortgage rate is a mortgage where the interest rate stays the same for the term of the mortgage loan.
A fixed rate mortgage is a safe option because you know that your mortgage payment will not change during the term of the mortgage. Families who live on a tight budget are better suited to a fixed term mortgage as it ensures that there are no surprises.
A fixed rate mortgage usually bears a slightly higher interest rate then a variable rate mortgage. The interest rate is fixed based on the term of the mortgage so the shorter the term, the lower the interest rate.
Banks and other major financial institutions generally want customers to lock into a 5 year fixed rate mortgage because it yields them the most interest and it is locked in, so they know that the customer is theirs for at least 5 years.
Now as I mentioned, it all depends on you, your budget and your lifestyle. If you are living on a tight budget, don’t plan on moving for the next 5 years and want to guarantee your mortgage and interest rate, a fixed rate mortgage is right for you.
On the other hand if you have lots of surplus cash flow in your budget, low debt and want to pay off your home fast, opt for a variable rate mortgage which generally carries a lower interest but also comes with the risk that if mortgage rates go up, yours will too!
Whether you chose a fixed rate mortgage or a variable rate mortgage, if you want to pay off your mortgage quickly, outside of choosing the type of interest, you can also do other things to speed up the process of paying down your mortgage.
You don’t have to choose a 30 year amortization. Did you know that reducing your mortgage amortization by 5 years will only increase your mortgage payment slightly but will save you 10‘s of thousands in interest?
Also consider accelerated mortgage payments as another way to pay more to your mortgage principal.
When planning for a mortgage, always consider the benefits and risks to the mortgage products you are considering so that you make the most informed choice. It's not always about the lowest Ontario mortgage rates. It's also important that you commit to a mortgage you can afford to repay, at terms you can live with. For more information about fixed rate mortgages please visit http://www.gtamortgagematters.com/