Signature and Silicon Valley Bank’s collapses have heavily affected US and Canada’s financial markets. However, there might be a silver lining for some homeowners as Canadian banks and lenders are reducing their mortgage rates in the aftermath of falling bond yields.
But Is It the Right Time to Lock in Your Mortgage Rate?
This post aims to shed light on that. But before jumping to a conclusion, we will discuss the difference between fixed and variable mortgage rates so you can easily understand the underlying logic of the verdict. Let’s start.
Fixed vs Variable Mortgage Rate
The interest rate remains the same for a specific period (typically a 3–5-year term) in the case of a fixed interest rate. It provides the safety of knowing what you are liable to pay, how much of the total cost will go toward interest payments, and how much toward the principal amount. However, you won’t be able to take advantage of the mortgage interest rate drop unless you pay a penalty for breaking the existing terms and conditions. This is a potential downside of a fixed interest rate.
Variable-rate mortgages, on the other hand, offer flexibility. In case of an interest rate drop, more of your payment will go toward the principal. It will allow you to pay off your mortgage loan quicker. Contrarywise, borrowers will need more time to repay their loan when interest rates go up because, in that case, more of the payment will go toward interest payment and less toward principal.
While variable-rate mortgages offer flexibility, they fail to provide budgetary security like fixed-rate mortgages. However, according to Calgary real estate lawyers, most variable-rate mortgages are available with an option to change the variable rate to a fixed rate.
Final Verdict
We hope the nitty-gritty regarding fixed and variable mortgage rates is now clear to you. Let’s discuss whether Canadians should lock in their mortgage rate or not. Well, taking this decision is not easy. Proper analysis, market knowledge, and homework are required for that. Most importantly, we can’t take a one size fits all approach to answer this. The story and dynamics of each borrower are different so does their requirement. Therefore, we recommend consulting with an expert who can understand your unique condition and specific needs and help you decide accordingly. If you are wondering where to look, visit the best lawyer near me or you.
We are a leading Calgary law firm serving the real estate sector. Our mortgage lawyers in Calgary are well-trained and experienced to evaluate your condition and help you decide whether you should lock in your mortgage rate now or not. We can also help you in other areas of real estate. Download our app now to stay connected with Peter B Mason Real Estate Lawyers. We guarantee the best advice and legal support at an affordable rate.