Canadian Money Forum banner
1 - 2 of 2 Posts

·
Registered
Joined
·
3,791 Posts
Back to the first original question of variable vs fixed. I have always had variable. However, I did advise a friend to get fixed when they renewed last year. The person after a nasty break up and some hard financial times, needed to have the most stability while they are rebuilding. I am so glad I did. Currently their fixed rate is 2.09 until 2026 which is lower than my variable. So that should give them a few years to settle and plan for larger payments. They could not handle much now for increase. Just to remind people that generally variable is better but there are exceptions.

I just got off the phone with our mortgage broker. Normally, I can always get ahold of him. He says people have been freaking out and calling a lot. In our case, my mortgage isn't up for renewal until next June. I considered locking in or doing an extend and blend or something. Good thing cooler heads prevailed. Our balance pretty low, we have under 3 years left, and can still make lump sums. My plan is that if the rates keep climbing, we will make a lump sum at the end of this year, and the mortgage will be paid off at time of renewal.
 

·
Registered
Joined
·
3,791 Posts
You have to consider that a fixed rate carries a large penalty should you need to break your term.

Also, you cannot compare your mortgage rate with a different period in time. When your friend locked in 2.09%, you should be comparing it to the variable rate at that time. Also, you cannot just focus on 1 rate for 1 term only. Typically, a mortgage cycle will contain 5 renewals. Therefore, its the average of all rates that you should be considering. Choosing the lowest rate at each renewal guarantees you that you will end up with the lowest average.
Very true. I was bringing up an example where it's not just about the cheapest interest rate, but rather there are some case where fixed is better using metrics that aren't just financial. In the case of my friend, they were so close to the edge last renewal, any increase in expenses could have toppled them. I even questioned if they should be owning a home (probably not at the time), but when we looked at the options of selling and moving and the overall picture, staying was the best idea. If they were trying to buy based on their financial status, I would have told them no way. I would go as far as saying someone who can't afford the variability of a variable mortgage shouldn't buy a house, but that's a different discussion.

My point for some people, if they cannot afford much of a fluctuation, then a fixed mortgage may may be an appropriate choice at the time. So variable is not always the better especially for someone on a really tight budget and renewing.
 
1 - 2 of 2 Posts
Top