Mortgage101: Variable or fixed?

Variable or Fixed?

Talking a bit more about the age-old rate debate. Variable or fixed?

First time? Don’t feel like listening? Check out the audio transcript below.

Variable or fixed… talking about mortgage rates

Todd: [00:00:04] We have our first caller it is Giles. Giles, how are you?

Giles: [00:00:09] Good, How are you?

Todd: [00:00:09] I’m well. Go ahead with your question.

Giles: [00:00:12] So my mortgage is up for renewal next year. I was wondering if I should lock it in or go variable.

Clinton: [00:00:17] I think it’s a great question. A very hot topic right now and very, very appropriate. Historically, people do better in a variable rate product. So if we look at, you know, over the last 25 years, people have done better in a variable. Right now, at a fixed rate, it’s lower. So we’re a little bit in an odd time where the fixed rates are lower than the variable. But the economists are projecting that through 2020 that the prime rate may go down. So, you know, if you’re willing to roll the dice.

A variable might be better

I think the variable will be better, but you need to weather a little bit of the storm. So hopefully that helps. Everybody’s situation is different. There have been a couple of news articles actually this week where clients have had extraordinarily large penalties breaking a fixed rate product. And a fixed rate isn’t for everyone. A lot of consumers will break their term early. A lot of things change in people’s lives, you know, matrimonial breakdown, health issues, relocation. And sometimes you just don’t know if you’re gonna break your mortgage. With a variable rate, your guaranteed that your penalty is only going to be three months’ interest.

Todd: [00:01:20] Is that for every lender? By the way.

Clinton: [00:01:22] Every lender.

Todd: [00:01:23] That’s the law of the land.

Clinton: [00:01:25] That is the law of the land in terms of a variable rate product. In a fixed rate, you’re either going to pay three months interest or an interest rate differential, which is even higher. And the banks are just like the casinos. They never lose.

If you have any questions about homeownership or what that means for your situation, get in touch with us here.