January 26, 2023

Fixed vs Adjustable-Rate Mortgages: Which Is Right for You?

a happy couple moving into a new home, closed boxes on the floor

The cost of housing has been the talk of the town lately, no matter which town you live in. Seemingly across North America, owning a home is getting more expensive quickly.

In Ontario, the housing market has somewhat cooled of late. However, that’s only relative to huge rises in the years prior. Plus, the Bank of Canada has increased the key interest rate more this year than in decades past, making borrowing more expensive for some types of mortgages.

At the start of 2022, the Bank of Canada’s interest rate was 0.25%. Today, it’s 4.25%. What does this mean for homebuyers, and how will this affect your mortgage?

Let’s take a closer look at the types of mortgages available so you learn what’s right for you.

What Are Fixed-Rate and Variable Mortgages?

First, let’s define the terms. A fixed-rate mortgage is one where the dollar values don’t change over the term. The amount you pay in month one will be the same as you pay in the final month.

In contrast, variable mortgages have fixed percentages you pay against prime, and prime will fluctuate over the mortgage’s lifespan. Your lender will give you either a “prime-plus” or “prime-minus” term. Payments may remain constant, except the amount of money that goes towards the principal may vary depending on market conditions. An example should clarify how it all works.

Say a homeowner has a fixed-rate mortgage where they’ve agreed to pay 2% interest in addition to their monthly mortgage payments. That will remain constant no matter what happens in the market. The percentages and the dollar amounts don’t change.

If the same person agrees to a variable mortgage of prime-plus 0.5%, and prime rises to 3%, they’ll have to pay %3.5 in interest in addition to their monthly mortgage. If they were given a prime-minus 0.5%, and the prime rose to 3%, their monthly interest payments would be 2.5%.

Many factors impact the rates lenders give you, as with any form of borrowing.

Not One or the Other

Leading mortgage experts like Burke Financial make it possible for homebuyers to make payments flexibly by allowing them to split between a fixed and variable mortgage. If preferred, you can get a fixed rate for years until a variable mortgage kicks in after a set date.

Burke Financial will listen carefully to your needs and do everything we can to meet them. Some clients are looking to get the payments over as quickly as possible, while others prioritize economic flexibility.

Everybody has their own lifestyle goals, financial situations, and careers to manage. Speak to us about whether a variable or fixed-rate mortgage is right for you. We’ll ensure you understand all the details and options available.

Locked-In Versus Fluctuating

Nobody can read the future, and it’s impossible to know now what the economic outlook will be in a year or further down the road. Some people simply need the economic predictability of a fixed mortgage.

Variable mortgages can give homebuyers additional flexibility. Variable mortgages can also be opened or closed, so homebuyers can take advantage of favourable markets and lower interest rates and convert to a fixed rate at any time.

Variable mortgages tend to have a lower interest rate than fixed ones, which makes them appealing. The lower payments are a trade-off against predictability. This can change in certain conditions.

an out of focus couple holding house keys, touching

When you visit Burke Financial, we’ll listen carefully to all your needs. We understand the mortgage process because we’re experienced professionals who have done this for years! Burke Financial is proud to work closely with each client, so our financial expertise can help stabilize their finances and achieve their lifestyle and career goals.

We can broadly outline the differences between variable and fixed mortgages, but ultimately, you’ll need to speak to one of our brokers. Burke Financial won’t stop until you feel at peace with our financing — we’ll match the right options to fit not just your finances but your temperament.

All Levels of Debt, Income, and Credit

Some homeowners looking to make ends meet wisely rejig their existing mortgage, tapping into the equity they’ve built up over the years to help shield themselves from changing financial circumstances.

It’s only fair that the money you’ve already invested in your home works for you, and Burke Financial specializes in mortgage refinancing in Ontario. We’re proud to work with homeowners of all levels of debt, credit, and income, even if a bank has refused them a loan.

Everybody deserves to unlock the wealth they’ve built over the years, no matter how much money they make or their debt levels. Sometimes people need access to a large amount of money quickly to pay for emergency home repairs or even a renovation to improve their living quarters.

Perhaps there’s an opportunity you can’t afford to miss out on, and you need to purchase an investment property that will serve as a nest egg. We regularly work with people across society who have a wide range of needs.

Whatever situation you face, we have a solution. Visit us to get personalized and devoted help concerning your mortgage payments. We’ll save you money and streamline all your monthly payments, so the payment process is more affordable and less stressful.

Refinancing can let you access up to 85% of your home’s value, not including any outstanding mortgages.

With inflation on the rise and not appearing to slow down soon, interest rates in Canada keep increasing as the government tries to level out the effects of bottlenecks in global supply chains, steady demand in the housing market, and even energy uncertainty. The Bank of Canada needs to plan for things outside of its control, but homeowners are totally in charge of the type of mortgages they want. Visit Burke Financial to learn whether a variable or fixed-rate mortgage matches your needs best and which type of fixed or variable mortgage works for you. You can read all you want about mortgages, but the devil is in the details, so speak to a specialist who will hear your case.


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