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The Great Mortgage Debate - Fixed Vs Variable.

Wednesday, February 24, 2021   /   by Mario Daniel Sconza

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


Pros:

  • Lock in payments for a specific time. You don’t need to worry about potential rate increases.
  • Take advantage of historically low rates.

 

Cons:

  • 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:


Pros:

  • 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*.

 

Cons:

  • Your payment can go up based on the prime rate.
  • The monthly payment could fluctuate year over year.

?? Historical Returns

Variable rates have been historically lower than fixed rates.*

Blue Line: fixed

Orange Line: Variable

?? Interesting Stats:**

·        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.

eXp Realty of Canada
Mario Daniel Sconza
4711 Yonge St 10th Floor
Toronto, ON M2N6K8
416-230-3476

Information is provided exclusively for consumers’ personal use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. Data is deemed reliable, but is not guaranteed accurate by the MLS®.
Information is provided exclusively for consumers’ personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing. Data is deemed reliable, but is not guaranteed accurate by the MLS®. Copyright 2021 Last Updated July 27, 2021
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