When shopping for a mortgage, many home buyers shy away from variable rate mortgages in favour of fixed rate mortgages (FRM) that offer more stability and allow for better planning and budgeting. However, not all mortgage rates are designed equally; they can have variable interest rates and terms and conditions.
Variable rate mortgages (VRM) in Toronto are priced based on lender prime rates, and usually fluctuate depending on whether the Bank of Canada (BoC) raises or lowers its overnight rate.
Although fixed rate mortgages appear to be rising, many borrowers are contented with the certainty of a fixed monthly payment. On the other hand, VRM are fairly low cost, though they are the riskier of the two. That said, the BoC has recently appeared to be cautious of the economic outlook (low oil prices, weak Canadian Dollar relative to the US Dollar), which makes it unlikely to raise its overnight rate in the near future.
Variable rate mortgages in Toronto seem like a good option for the next couple of years, but beyond the low interest rates offered, there are other advantages of VRM over FRM, including:
Today, variable rate mortgages in Toronto are a great option, and since the short-term fixed rates used to determine mortgage penalties are quite high compared to bond yields, it is perhaps a good time for the people of Toronto in a FRM to break and move to a VRM.
To identify your lender’s mortgage penalty for breaking your current mortgage, our experts at Northwood Mortgage can help you work it out, and also provide you with a report that will help you identify any savings you are likely to make by switching to lower variable rate mortgage in Toronto.
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