# For first-time owner: Variable or Fixed



## Harper77 (Nov 11, 2009)

So we are close to putting an offer in on a house within the next day or so and was just wondering:

What is the best choice for mortgage right now: fixed OR variable? Mtge amt will be 170K.


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## bean438 (Jul 18, 2009)

In my opinion the goal is to pay the least amount of interest, but people always stress out about rates going up.
So, why not:

Go variable, and get a lower rate , but
Since you were willing to go fixed at a higher payment take the difference and set up a separate savings account and stash the money there. Every 6 months or so, make an extra mortgage payment.

This is what I do. I went 1 year fixed, but put aside as if I was 5 year fixed.
I know I told you to go variable, while I went fixed, but 1 year fixed had a better rate than 5 year variable.

In the end the lowest rate available is what I do.


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## financeguru (Jan 18, 2010)

i have chosen to go one year variable...i think the discount of the variable from prime is going to increase as the economy gets on a firmer footing and i'd like to take advantage. As a matter of principle, i will always go variable no matter what the interest rates are orwhere people think prime is heading. 

For more discussions on this issue go to this thread:
http://www.canadianmoneyforum.com/showthread.php?t=2013


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## OhGreatGuru (May 24, 2009)

It's a matter of how well you can sleep at night and how much surplus you have in your cash flow if rates go up. Variable rate mortgages gained popularity when interest rates went into free-fall. Now a lot of people are either too young or too short-memoried to remember when mortgage rates went to 19%. I don't think anyone is expecting anything that bad in the foreseeable future, but everyone is predicting rate increases of some kind soon. My advice would be lock into a fixed rate mortgage that has some pre-payment privileges.


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## Four Pillars (Apr 5, 2009)

It seems like over the last decade or so that short term mortgages have done much better than 5 year fixed.

That said, we went with a 5 year fixed a couple of years ago because things were a bit tight so we would have had a hard time dealing with a big increase in interest rate. Our decision was based on reducing risk alone.

I suspect our next renewal will be for a variable since we are getting near the end....


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## ChrisR (Jul 13, 2009)

Here are two things to consider:

1. There is no question that "9 times out of 10", the variable mortgage beats the fixed mortgage (in terms of total interest paid over the term).

2. There is also no question that interest rates can't go down from here. They can only stay the same or go up.

Those two things considered, its difficult to believe that right now is not the "1 time out of 10" that a fixed rate will beat the variable.

But then... I'm a keyboard warrior, not a homeowner. So make sure that your decision is well researched and is right for YOU.


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