Tuesday, May 6, 2014

Variable or fixed-rate — what’s the right mortgage for you?

If you’re in the market for a mortgage, one of the first — and most common — questions to ask yourself is whether you want a variable or fixed-rate mortgage.
Variable-rate mortgages, which have been around in Canada since the 1990s, are typically set at a pre-determined percentage above the prime rate and then fluctuate up and down with prime. The interest rate is generally a little lower than that of a fixed-rate mortgage, which offers the peace of mind of having a locked in rate for the duration of the mortgage term.
At a time when interest rates are expected to stay the same or decline, variable-rate mortgages are usually the more attractive option. But when faced with rising interest rates, locking in at a fixed rate can be a good way to reduce the risk of unexpected mortgage payment increases down the road.
These days, despite the fact that the Bank of Canada has held its overnight rate steady since September of 2010, more Canadians than ever say they would choose a fixed-rate mortgage if they had to make the decision today. A recent Nielsen poll found that 48 per cent of Canadians would now choose a fixed-rate mortgage, compared to 31 per cent who would opt for a variable-rate mortgage and 19 per cent who were undecided. That marks the fourth consecutive year where fixed-rate mortgages have been the most popular option.
Which mortgage is best for you? If you’re unsure, we can help. Visit North Winnipeg Credit Union today and we’ll sit down with you to work through your options.

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