Adjustable Rate vs. Variable Rate Mortgage - What is best for you?

An Adjustable Rate Mortgage is quickly becoming one of the most popular options for our clients. There is a tremendous spread between the prime interest rate and a fixed long term mortgage. This spread can be as much as 3% and with the average mortgage in Canada approaching $130,000, this difference in interest rates can be tremendous. The adjustable rate mortgage is quite different than traditional mortgages in that long-term mortgages are priced according to Bond market, while the adjustable rate mortgage is priced in accordance with the prime interest rate. The longer the term, the higher the interest rate. When you select a longer term mortgage you are agreeing to pay a higher interest rate for that term. It is similar to paying an insurance premium to guarantee the interest rate but the insurance premium is the higher rate. An adjustable rate mortgage gives you total control. Your mortgage would renew every 3 months at a fixed interest rate. If you change your mind and decide to convert to a longer term, you would be guaranteed a minimum discount off the banks posted rates. The variable rate mortgage allows you to have the best of both worlds. Short term pricing with the ability to lock in your rates at any time. With over 70 variable rate or adjustable rate mortgage products available in the Canadian market right now, let us explain your best mortgage options.

• Prime less 80% for the mortgage term
• Maximum 95% Loan To Value
• Semi-annual compounding
• Five year term delivered in automatically renewed three months fixed rates periods
• Prior to conversion open for repayment on payment of three months interest
• Monthly, weekly, or bi-weekly payments available
• 15% and 15% prepayment/payment increase
• Ability to convert to a 3, 4, or 5 year term at any time at a guaranteed discount
• The discount off Royal Bank Prime is guaranteed for the renewal periods
• Guaranteed 1% discount off banks posted 3, 4, or 5 year rate a time of lock in

 

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