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The Summary of Differences between Fixed and Variable Mortgage Rates in Oakville

A mortgage is a large financial commitment with an overwhelming number of options. Choosing between fixed mortgage rates versus variable mortgage rates is one of the most important decisions when shopping for mortgage rates in Oakville, or when it is time for refinancing your mortgage. Your income, lifestyle, and risk tolerance will weigh heavily on your decision when deciding on the type of mortgage rates in Oakville that are right for you. Here is a summary of the main differences between the two mortgage rates.

 

Fixed Mortgage Rates

  • Fixed-rate mortgages allow you to lock in at an interest rate for a fixed period of time, which is the term of the mortgage.
  • A main benefit is that you will know what your payments will be each month.
  • The risk tolerance is low, but you have to pay a premium for the security you get with a fixed rate in the form of higher interest rates.
  • The downside is that you cannot take advantage of a lower interest rate, and the ability to have more of your payment go towards the principal and less to interest if the interest rates drop during the term of your mortgage.
  • Fixed rates are affected by the Government of Canada bond yield for the same term.
Fixed mortgage rates are best for you if you enjoy the security of a rate that is guaranteed not to change for the term of the mortgage, and if you are willing to pay a slightly higher interest rate for that security. If you prefer the peace of mind of predictable mortgage payments that are guaranteed not to change, you may want to opt for fixed mortgage rates.
 

Variable Mortgage Rates

  • Interest rates will fluctuate with the lender’s prime interest rate.
  • A main benefit is that a variable rate comes with a typically lower interest rate than with a fixed-rate mortgage.
  • Variable rates are affected by the prime rate, which is ultimately affected by the Bank of Canada key overnight lending rate.
  • The risk tolerance is high since there is the fear of rising rates.
  • Regular mortgage payments are set for the term even though interest rates may fluctuate during this time.
  • When interest rates go down, an increased amount of your payment goes to pay principal. As more money goes into the principal, the faster the mortgage is paid off.
  • When interest rates go up, there will be an increase in the portion of payment that goes into paying interest, and less going towards paying down the principal.
Variable mortgage rates are best for you if you are comfortable with interest rate fluctuations, gaining possible long-term savings in interest.
 
As no one can be certain what the future holds, it is best to consider your own situation when choosing between fixed and variable mortgage rates in Oakville. You are not alone in shopping for mortgage rates in Oakville. Mortgage specialists are highly trained professionals who can work with you and guide you through the entire mortgage process. Finding a lender committed to providing personalized service that is professional, ethical, and knowledgeable will provide you with the optimal financial solution for you. 

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