Approximately 32 per cent of Canadians are currently in a variable rate mortgage, which, with rates steadily declining for the better part of the last ten years, has worked rather well – so far!

Recent increases have triggered questions and sometimes concerns, and these questions and concerns are best discussed with us directly – not necessarily with the lender or Bank you may be dealing with currently.  The main reason is that there are nuances you may not think to consider before you lock in and those likely will not be primary topics for your lender or Bank to discuss with you.

Over the last several years, there have been countless headlines warning us of impending doom with both a house price implosion, and interest rate explosion, very little of which, thus far, has come to fruition. However, recent prime rate increases may cause some anxiety among variable rate clients and there are, of course, new mortgage rules taking effect on January 1st.  WINESTONE LAVAL would love to offer a free financial check-up to help you see where you are at and what your best options might be moving forward.  We provide an unbiased second opinion that has saved people thousands of dollars!!!

If you are considering moving to a fixed-rate mortgage while rates are still relatively low, or even want a second opinion on your current financing package, before accepting what a lender or Bank may offer as a lock in rate, especially if you are considering freeing up cash for such things as renovations, travel or putting towards your children’s education, it is best to ask us to review all your options.

Even if you simply wanted to lock in the existing balance, again the conversation is crucial to have with the right advisor and person you trust, as one of the key topics should be pre-payment penalties as well as exit strategies.

For example, penalties for breaking a mortgage vary from mortgage to mortgage and can cost thousands of dollars.  People often assume the penalty for breaking a mortgage amounts to three months of interest payments which, in the case of 90% of variable rate mortgages, is correct.

Keep in mind that penalties vary from lender to lender and there are different penalties for different types of mortgages. In addition, things like opting for a “cash back” mortgage can negatively influence penalties even more, with a claw-back of that cash received in the beginning.

Although variable mortgages have their place in the market, the popular option has generally been fixed-rate mortgages. This structure allows for easier budgeting, with payments staying constant for a set amount of time. Variable rate mortgages can be seen as a riskier venture due to fluctuating interest rates, whereas, fixed-rate mortgage payments stay level throughout the term.

As always, if you have questions about locking in your variable mortgage, or breaking your current mortgage to secure a lower rate, or general mortgage related questions, contact us to discuss first.