Are you getting
ready to buy a home and obtain mortgage financing? Knowing your options before
jumping in is important. This is part 2 of a 4 part series that gives you
important Ontario mortgage news and information about the various types of
mortgages available in Ontario. Getting a mortgage does not have to be stressful,
and knowing what mortgage types are available to you can help keep the search
for your perfect home stress-free.
This second Ontario mortgage news blog will
focus on the variable rate mortgage. What is a
variable rate mortgage? A variable rate mortgage is a type of mortgage
financing that fluctuates according to rising or falling interest rates. This
means that, when your mortgage broker finds a lender to approve your variable
rate mortgage, your payment is not static and may change if interest rates
change. There are many advantages to this type of mortgage.
Firstly, if you tend to follow the
philosophy that no risk means no reward, you understand that taking some risks
could equal major savings in the long run. A variable rate mortgage can provide this. Since it is based on the rate of
interest, if this decreases, so does your monthly payment. If it decreases
substantially, then this could equal big savings for you.
Another big benefit to a variable rate
mortgage is the fact that variable rate mortgages usually offer the lowest
mortgage rates available. Since the bank or lender approving your mortgage
recognizes the risks that are inherent in a variable rate mortgage, they offer
the lowest rate to you. This means that even if the interest rate does increase
slightly over the term of your mortgage, you will likely not feel the sting.
It is important to remember though that as
the Canadian economy improves, interest rates may increase if the prime lending
rate is increased by the Bank of Canada. That being said, many lenders do
provide options with variable rate mortgages that will allow you to lock in
your variable rate mortgage if interest rates do
increase.
Why choose a variable rate mortgage. If you are not afraid to take a bit of a risk in exchange
for the chance to save, or if you are planning of staying in your house for a
very short period of time, a variable rate mortgage may provide the best
financial solution for you. However, if your plans are more long-term, you may
want to discuss the option of a fixed rate mortgage with your mortgage broker.
Mortgages don’t have to be complicated, and
you should avoid getting stuck in a mortgage you don’t understand by visiting a
mortgage broker and getting them to explain all of the different options available
to you.
For more Ontario mortgage news or to find
out more about the benefits of a variable rate mortgage, please contact Paul Mangion of The
Mortgage Centre at 416-204-0156 or visit www.themortgagecentretoronto.com.
