Pros and cons of a variable vs. fixed mortgage rate

If you are planning on buying a home, knowing what type of mortgage to get is very important. There are a number of terms you can select depending on your financial needs and how long you want to finance. As well, you will need to decide whether to choose a variable or fixed mortgage rate. The Canadian housing market has seen rates plummet in the last couple of years and even more so in the last couple of months. It is by all means an ideal time to buy, but being aware of the advantages and disadvantages of each loan type will help you make the right decision.

Fixed rate loans have been the most popular traditionally, due to the fact that they offer buyers the peace of mind of a stable payment.  The rate is essentially locked in at closing and is guaranteed to never go up. Given that housing costs account for a large portion of most people’s monthly expenses, knowing what you’re going to pay each month certainly has its benefits. On the other hand, if the market ever sees a further decrease in mortgage rates (it may be hard to believe at this point), you will not be able to take advantage of the trend. For better or for worse, your rate will remain the same for the duration of the loan. With this in mind, here are some of the benefits and drawbacks of both fixed and variable mortgage rates.

Fixed or variable: which mortgage type is right for you?

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