One of the most critical decisions you’ll make when getting a mortgage is choosing between a fixed-rate and a variable-rate mortgage. Each option has its benefits and risks, and selecting the wrong one for your financial situation and risk tolerance can lead to stress and unnecessary costs over the long term.

Fixed-Rate vs. Variable-Rate Mortgages

1. Fixed-Rate Mortgages:
   • Your interest rate and payments remain constant for the entire term of the mortgage.
   • Ideal for those who value predictability and stability, especially in a rising interest rate environment.
   • Typically comes with higher penalties for breaking the mortgage early.
2. Variable-Rate Mortgages:
   • Your interest rate fluctuates with changes in the lender’s prime rate, which is influenced by the Bank of Canada’s rates.
   • Often starts with lower interest rates, making it attractive in a stable or declining interest rate market.
   • More flexibility with smaller penalties for breaking the mortgage.

How to Choose the Right Mortgage for You

1. Assess Your Risk Tolerance: Are you comfortable with the possibility of fluctuating payments? If not, a fixed-rate mortgage may be the better choice.
2. Consider Market Trends: If interest rates are expected to rise, a fixed-rate mortgage might provide peace of mind. Conversely, if rates are stable or declining, a variable-rate mortgage could save you money.
3. Plan for the Future: If you anticipate selling your home or refinancing during the term, a variable-rate mortgage with lower penalties could save you money.
4. Work With a Mortgage Agent: A knowledgeable agent can guide you through the pros and cons of each option and help you match your choice to your financial goals.

Why This Matters

Choosing the wrong type of mortgage can lead to higher costs or financial stress. For instance, if you choose a variable-rate mortgage during a period of rising interest rates, your payments could increase significantly, straining your budget. On the other hand, locking into a fixed-rate mortgage when rates are expected to decline could mean missing out on potential savings.

Read the full list of the top 10 mistakes to avoid when getting a mortgage here: Top 10 Mortgage Mistakes

Have Questions? Let’s Talk.

Choosing the right mortgage is crucial for your financial future. I’m here to help you evaluate your options and make the best decision for your needs. Call me at 613-318-6315 or schedule a call here: Book a Call.

Let’s find the mortgage that works for you.

-Phil