What are the best rates?
When looking at mortgage rates it is important to understand that rates are not the only thing you should be looking at when deciding what mortgage product to choose. For example a 1.99% fixed rate for a 5 year fixed term is extraordinary. However, looking into this further could find that the term is 5 years and the interest rate is fixed at 1.99%… for only the first 6 months. After 6 months this rate will increase to the posted fixed rate of 3.15% for the remainder of the term. This is not nearly as extraordinary as it originally appeared. The rule of thumb is: If It Is Too Good To Be True, It Is Too Good To Be True! Using a mortgage broker can ensure that you are informed of what your mortgage product entails, and if there are any hidden costs behind the mortgage product that you don’t see up front.
What is the difference between fixed and variable rates?
Fixed Rate Mortgage: For the bank, this is a lower risk. It is usually higher than a variable rate. It remains constant or fixed for the term of the mortgage which means that your payments remain constant for the term of the mortgage. The rate is based on typical rates that are being offered by banks at the time the client enters into the mortgage contract.
Variable Rate Mortgage: This is a higher risk for the bank. It is harder to qualify for this rate, which means the bank allows less debt in your financial profile compared to qualifying for a fixed rate. The interest rate is usually compounded monthly and fluctuates with the prime rate at the chartered banks. Meaning that your actual mortgage payment can either increase or decrease during the term of the mortgage. In most, but not all cases, the variable rate mortgage is fully open. An open mortgage allows you to pay back the borrowed funds without notice or penalty.
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