# Variable mortgage but pay as fixed?



## clovis8 (Dec 7, 2010)

I got this idea from a Mint article. Is there a Canadian mortgage provider that would give me a 5 year variable (prime -.9ish) but allow me to pay as if I were a five year fixed (3.4ish)?

That way I would have a cushion if rates did rise since I was already paying higher and also be paying down my mortgage faster.


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## Dmoney (Apr 28, 2011)

clovis8 said:


> I got this idea from a Mint article. Is there a Canadian mortgage provider that would give me a 5 year variable (prime -.9ish) but allow me to pay as if I were a five year fixed (3.4ish)?
> 
> That way I would have a cushion if rates did rise since I was already paying higher and also be paying down my mortgage faster.


I'm sure you could just mimic a 5 year fixed with extra payments. I know some banks are picky about when you can pay extra down (ie maybe only one lump-sum payment a year) but that might be the simplest route.


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## HaroldCrump (Jun 10, 2009)

clovis8 said:


> I got this idea from a Mint article. Is there a Canadian mortgage provider that would give me a 5 year variable (prime -.9ish) but allow me to pay as if I were a five year fixed (3.4ish)?
> 
> That way I would have a cushion if rates did rise since I was already paying higher and also be paying down my mortgage faster.


Your payment amount is usually fixed, what matters is how much is going towards principal vs. interest.
If/when rates rise, more goes towards interest and less towards principal.

Most lenders allow you to double your payments once a year.
You can easily set up what you are trying to do by collecting all the extra payments into a HISA and applying them towards the mortgage if rates rise.


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## OnlineHarvest (Apr 6, 2009)

clovis8 said:


> I got this idea from a Mint article. Is there a Canadian mortgage provider that would give me a 5 year variable (prime -.9ish) but allow me to pay as if I were a five year fixed (3.4ish)?
> 
> That way I would have a cushion if rates did rise since I was already paying higher and also be paying down my mortgage faster.


Calculate your mortgage payment for 3.4% (pretty specific! lol) for the amount you intend to mortgage, and see what is the difference between that payment and your variable rate.

Ask your lender if you can over-contribute without penalty based on the new (higher) dollar value.

Most lenders will allow you to increase your mortgage payment as long as it lies within its prepayment amounts. If they allow it, ask them to make that your new payment amount so you don't have to make a new contribution with every payment - it will be done automatically


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## jamesbe (May 8, 2010)

Just ask. When I did mine with BMO, they asked me how much I wanted my payment to be so I went with a higher figure. After the initial setup it could only be changed within the rules set out in the contract but the initial amount could be anything I wanted.


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## rookie (Mar 19, 2010)

jamesbe said:


> Just ask. When I did mine with BMO, they asked me how much I wanted my payment to be so I went with a higher figure. After the initial setup it could only be changed within the rules set out in the contract but the initial amount could be anything I wanted.


the way they do this is by adjusting the amortization period. this would be the best way to achieve what you intend. Just one note, the amortization period has to be more than the term of the mortgage. if you want to pay down even more, then you have to resort to other bells and whistles such as double up payments and other prepayment options.


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## HaroldCrump (Jun 10, 2009)

rookie said:


> if you want to pay down even more, then you have to resort to other bells and whistles such as double up payments and other prepayment options.


In such a case, it is best to go with a variable open mortgage.


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## rookie (Mar 19, 2010)

HaroldCrump said:


> In such a case, it is best to go with a variable open mortgage.


of course. the only problem with that is that the best you can get is about P-0.25


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## Lephturn (Aug 31, 2009)

Yes they will let you do this. I've been doing just this for the last 6 or 7 years.

I set the payments a bit higher than that. I've been using First Line, although one of the mortgages was with TD.

Recently I did just get prime -.9 from Firstline although I had to beat them a bit to get it.


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## chantl01 (Mar 17, 2011)

Lephturn said:


> Yes they will let you do this. I've been doing just this for the last 6 or 7 years.
> 
> I set the payments a bit higher than that. I've been using First Line, although one of the mortgages was with TD.
> 
> Recently I did just get prime -.9 from Firstline although I had to beat them a bit to get it.


I have a prime -0.7 variable open mortgage from Scotiabank. Of course, I got that rate a couple of years ago. What I like about it is that I can increase my payments by any amount I want, at anytime - online. So I've been paying as much as I can afford on a weekly basis. The bank automatically adjusts my amortization period down every time I make a change. I also deposit lump sums against it periodically, although I have to actually go into a physical branch for that.


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## kubatron (Jan 17, 2011)

I can get my clients prime-1%, and they HAVE TO pay based on 5yr floor fixed of 3.89%, so yes, it's possible (and add 20% if they want, plus 20% to the principal).

email me if interested, [email protected]


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