The age-old debate of Variable vs Fixed mortgage continues, and is one of the top mortgage questions I get when meeting with my clients whether they are first time homebuyers or buying their second home. Last week I met with a young couple who were looking at buying an Etobicoke condo located in West Toronto and they asked the same question…Variable VS Fixed? The following is a quick exercise I did with them to help illustrate my point.
Historical statistics show you would be better off taking a variable rate mortgage 96% of the time. Pick a point along the GREEN line above and stretch it out for 5 years. How many times does the ORANGE variable line go above it?
As you can see, most of the time the variable rate remains below the fixed rate. At the end of the day it comes down to comfort level. If you are the type of person who will lose sleep worrying about interest rates....a variable rate is not right for you no matter how much money you think you will save. However, if you have a stomach for moderate risk and are comfortable with the possibility of an increasing mortgage payment, a variable rate can save you thousands in interest and take years off your mortgage....allowing you to be mortgage free faster.
Brad Compton is a Toronto Mortgage Broker who structures custom mortgage solutions for his clients with terms that fit their needs, and great low mortgage rates.Brad Compton