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The Great Mortgage Debate - Fixed Vs Variable.
Fixed Mortgage: Your mortgage payments will stay the same for the duration of the term. Variable Mortgage: Payments change with the prime lending rate set by your lender.
Which is better?
Fixed Mortgage Pros and Cons
Lock in payments for a specific time. You don’t need to worry about potential rate increases.
Take advantage of historically low rates.
Expensive to break your mortgage. 60% of Canadians do.
Historically, the rates are higher than variable mortgages.
Expensive mortgage penalties. On a $500,000 mortgage the penalty is $22,500*.
Variable Pros and Cons:
Over the past 25 years, variable rates have been cheaper.
Typically charge a 3-month mortgage penalty for breaking the mortgage. On a $500,000 mortgage, the penalty is about $5,625*.
Your payment can go up based on the prime rate.
The monthly payment could fluctuate year over year.
· 3 million homeowners have a mortgage, out of a total 9.8 million homeowners in Canada.
· 6 million Canadians have a Home Equity Line of Credit (HELOC).
· 68% of mortgages in Canada have fixed interest rates.
· 27% of mortgages have variable or adjustable rates.
· The average amortization period is 22.2 years.
· The average mortgage interest rate in Canada is 3.09%, up from 2.96% in 2017.