Monday, October 5, 2009

There are a lot of variables in a variable rate

I just came across this article on the Financial Post's website. It is a great article for anyone who is struggling between choosing a variable or a fixed rate mortgage. The article states that most borrowers who chose a variable rate mortgage did better 88% of the time. This sounds great right? The article also goes on to point out that the above statistic does not mean that a variable rate mortgage is always the best choice. In the last year I have seen variable rate mortgages swing between Prime -0.6% to Prime + 0.6%. That is a huge difference! The current variable rate mortgage is sitting at prime, no discount or premium. These wild swings make it hard to know if you are getting a good variable product since the discount or premium can change quickly in just a few months.
When choosing a variable rate mortgage it's really important to evaluate your level of risk tolerance before deciding if the product is right for you. I have had many customers who have chosen a higher, fixed rate mortgage instead of the lower rate variable mortgage because they would rather know what their payment will be for the next 5 years. Variable or fixed is a very personal choice, one that I can certainly help you with but ultimately the choice is yours!

Read the Financial Post article HERE!

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