As a professional mortgage broker in Saskatoon, at Deb Murdoch – TMG The Mortgage Group, II often get asked by clients which type of mortgage is better: fixed-rate or adjustable-rate. Both have their pros and cons, and the answer depends on your personal situation, long term goals and the state of the economy.
In this blog post, I’ll break down the advantages and disadvantages of each type of mortgage, so you can make an informed decision that suits your needs.
Fixed-Rate Mortgages
1. Pros
A fixed-rate mortgage is one of the most common types of mortgages in Canada. With a fixed-rate mortgage, your interest rate remains the same throughout the life of your mortgage term, which typically is 5 years but in this market more are selecting 3 years. This means that your monthly mortgage payments will remain constant, making it easier to budget and plan for the future. Additionally, fixed-rate mortgages offer stability and peace of mind, as you don’t have to worry about interest rate fluctuations.
2. Cons
Typically, the downside of a fixed-rate mortgage is that the interest rate is usually higher than the initial rate of an adjustable-rate mortgage. But currently in this economy it is not. The fixed rate is lower than the adjustable rate mortgage.
Adjustable-Rate Mortgages
1. Pros
An adjustable rate mortgage is a type of mortgage where the interest rate changes with prime. Prime is based on the overnight rate set by the Bank of Canada. If prime decreases then your overall interest rate will decrease. This means that your payment will decrease as well. Typically the adjustable rate mortgage is lower than the fixed rate mortgage but in this economy it is not. Adjustable rate mortgage interest rates are higher than the fixed rates right now.
2. Cons
The disadvantage of an adjustable-rate mortgage is that it is dependent on prime and prime fluctuates. Thus your payments can go up or down. This can make it difficult to budget and plan for the future, as you won’t know how much you’ll be paying each month. Additionally, an adjustable-rate mortgage can be risky if you have a fixed income, as unexpected increases in your mortgage payments can put a strain on your finances.
In conclusion, choosing between a fixed-rate and adjustable-rate mortgage ultimately depends on your personal financial situation and long-term goals. If you prefer stability and predictability, a fixed-rate mortgage may be the best option for you. However, if you’re willing to take on a little more risk for potential cost savings, an adjustable-rate mortgage may be the way to go.
As a mortgage broker in Saskatoon, I specialize in helping first-time homebuyers and those looking for private lending options. If you’re unsure which type of mortgage is best for you, don’t hesitate to reach out. I’ll be happy to provide you with personalized advice and help you find the mortgage that suits your needs.
To learn more about my services, please click here. If you have questions related to your mortgage, I’d be happy to hear from you. Please feel free to call me at (306) 222-7900 or email debm@mortgagegroup.com.
