mortgages: variable or fixed (4% vs 5.15% !)
I was talking to my mortgage broker today as I'm getting ready to renew my mortgage later this summer. She recommended again (I said no the first time around for my initial term) to go with variable. As I was browsing the Internet to find more info, I stumbled on my RSS feeds and this info from Larry McDonald was just under my nose:
But academic studies, notably those from Professor Moshe Milevsky at York University, show that variable rates on mortgages are better over the long run. You will save on interest costs at least 75% of the time, and knock a year off your amortization period.
That's very interesting information. What I'm wondering though is what are the odds that in the next 3 to 5 years, the variable rate goes way above the 5.15% I could lock in now for 5 years.
I think I will take the chance this time with variable if more research proves it's a good option. For example, I'll double-check what would have happened if I had taken variable 5 years ago instead of locking at 4.49% for a fixed five years term.
2 comments:
You could go variable, but adjust the amortization period so that your payments are the same as they would have been if you locked in for 5 years. This way you pay down more principal and you'll be in a better position if interest rates rise.
Variable rates have been quite low this year and for the last 5 years or so. We're sitting at 4.75% prime right now and with discounts you can get a 4% rate with some lenders . As well, most variable rate mortgages are convertible to a fixed term with fully discounted rates. On the flipside, there are people who still like the certainty of a fixed rate mortgage , those rates are still quite low right now as well at around 5.5%. Either way you cant really go wrong right now as rates are historically low.
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