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Mortgage Rates:Fixed vs variable

3K views 5 replies 6 participants last post by  dougbos 
#1 ·
Hi All !

I am currently shopping around for mortgage rates

Till now , what I was offered

MCAP (Through Broker) :2.29 (If I put due on sale clause)
MCAP: Without the clause 2.49

Also, it only works with less than 20 % downpayment, if I do 20 or more its 2.49 & 2.69


RBC:2.49 5 year Fixed
2.1 Variable

its same for most of major banks

I am looking to get 400k mortgage for 25 year amortization period.


Any advice on going with fixed vs variable ?
Big bank vs small lender like MCAP (it is backed by BMO)
Whats your current rate ? what you went for Variable or fixed

Thanks
 
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#2 ·
Less than 20% means you'll need to pay cmhc fees which could be significant after all the interest is applied over the life of the loan.

Variable is he best in a falling or stable interest rate market, or even a slow rising one.

Fixed rate is better in a rising interest rate environment.

Look at all the clauses in the mortgage. Penalties, paydown, etc. Make sure you're comparing apples to apples, it's more than just a rate.
 
#3 ·
My friend runs this site (no compensation or affiliation):
https://www.ratespy.com/

In winter of 2015, we got 1.95%. With rates expected to rise, and as long as you plan on staying in the home for at least 5 years, hard to beat 5-year fixed. If there is a chance you'll move at all (and wish to avoid massive penalties) then variable is still, historically, a great deal.
 
#4 ·
for 20 years I always used variable. Even when rates went up, my rate never got to what the 5 year fixed would have been.
Your milage may vary, but ask your self why would you pay more now (with a fixed), compared to maybe pay more later later (with a variable)? Whatever you save on the variable, put in a savings account for a rainy day fund.
 
#5 ·
Stick with variable rates - regardless the spread in relation to a fixed rate.

Rates are abnormally low so anything under 3% is considered fantastic!

You cannot beat or escape a rate hike. If there indeed is one, you'll get hit sooner or later. The advantage of the variable is if there is a rate drop, then you benefit. If there is a hike, then just be glad you saved some money up until the hike.

Penalty calculations on a variable rate is a standard 3 month interest. On a fixed, its could be an IRD which is significantly higher - and ridiculously higher if your with a bank. Monoline lenders have a great advantage here.

You may consider lenders such as MCAP, First National, etc, as "small" lenders - but they are far from that. Their primary business is mortgages (hence the term monoline) so their job is to provide you the best product available. They sell a lot more than you think.

Steer clear from promotional rates which lock you in their terms or offer incentives - most of them expect it back if you break your term.
 
#6 ·
One thing to think about if going with a big bank is to know how exactly they calculate the penalty if you break a fixed rate early - are they using a posted rate or discounted rate to calculate the IRD? Also will they be registering the mortgage as a standard charge or a collateral charge. As JAG said compare all the variables. it is not just the rate to consider.
 
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