Ontario Mortgage Rates - Part 1 --- What is a Variable Rate Mortgage?

Trying to find the lowest Ontario mortgage interest rates? Whether you are looking to purchase a home or refinance it, the interest rate on your mortgage is important. Your mortgage interest rate will dictate how much interest you pay during your mortgage term and how much your mortgage payments will be.

There are two main types of mortgage interest rates in Ontario – fixed and variable rate mortgages. This article is about variable rate mortgages.

An Ontario variable interest rate mortgage is a mortgage where the rate is periodically adjusted to float with the Bank of Canada lending rate. Variable rate mortgages are also referred to as adjustable-rate mortgages.

If the Bank of Canada raises its lending rate, the financial institutions will adjust the interest rates of their variable rate mortgage customers accordingly.

When the Bank of Canada’s lending rate is low, Ontario Mortgage Rates are low. Variable rate mortgages carry risk because if the Bank of Canada’s lending rate increases, so does their mortgage rate and thus so does the monthly payment.

The reason individuals take the risk and choose variable rate mortgages is because variable rate mortgages are lower interest than fixed mortgages. Less interest means more of your monthly payments go to principal and your monthly payments would be less.

You can negotiate a variable rate mortgage that carries a provision that enables you to lock in your mortgage at any time. This way you can test out the waters with your variable rate mortgage while Ontario mortgage interest rates are low and then lock-in your mortgage rate if you think interest rates are going to increase.

Variable rate mortgages are best suited for those who have an aggressive goal of paying down their mortgage. This would be an individual with a lot of cash flow, one who is prepared to make more than their minimum mortgage payment each month.

Someone who is running a tight budget is not suited for a variable rate mortgage. The individual’s mortgage payment would increase in accordance with an increase in the mortgage rate so if their budget was tight to begin with, it could cause a major financial problem.

If you want to have the best Ontario mortgage rates, it pays to have a relationship with a good mortgage broker, one who works with all the banks, watching lending rates and ensuring that you always have the right mortgage and the best deal. To find out more about Ontario mortgage rates and variable rate mortgages please visit http://www.gtamortgagematters.com/