HawthorneVillager.com

With my closing date few weeks away, now I have to decide which option is best for me. Keeping in view the current and expected future economy outlook. I have to choice one rate out of the following mortgage rates which were secured by my mortgage agent.
1 yr 2.80%
2 yr 2.84%
3 yr 2.69%
4 yr 2.89%
5 yr 2.89%
5 yr variable closed- prime less 0.40= 2.6%

I need the recommendation and suggestion by the mortgage experts of this forum.

It's RBC and rate were secured few months ago. When did you get your rate of 2.55% secure from CIBC.

The answer is it really comes down to what your personal needs and goals are. For some, the one year might be the best if you were planning on not staying long, refinancing, not sure if you may stay in the country, etc. If you are feeling a bit more stable than that, than the 5 year fixed might be the better option than the shorter term options.

Now let's look at the variable. We are now starting to see some deeper discounts on variable rate mortgages making them seem attractive once again. The lowest 5 year variable you can get today is prime -0.50% (2.50%). With a difference of 0.39% over the fixed you are offered, it is really tough to say which is the better of the two and what might be right for one person may not be right for another. One big benefit to the variable rate mortgage is that if you find yourself in a situation where you need to break the mortgage mid term (most people don't make it to the 5 year point without breaking for one reason or another) than the variable rate mortgage will most likely have a lower penalty, as they are almost always just three months interest. The danger with variable rate mortgages is that if prime starts to increase (and it hasn't moved for almost three years now) than your rate (and payments) will go up. Prime rate usually increases in increments of 0.25%. Two increases and you are at 3.00%.

Prime rate could go up or down. While the experts have been calling for at least one increase for years now, it hasn't happened and no one knows for sure where it will go. IF it remained unchanged for the next 5 years (possible, but very unlikely), you would save $5,728.62 over the 5 year period with the variable in this example.

What it comes down to here is your risk tolerance. If you are more comfortable with risk, than the variable is something you may want to consider. If you prefer the piece of mind in knowing your rate and payment is locked in for the 5 years, than go with the fixed rate.

Hope you found this helpful.

_________________
Paul Meredith
Mortgage Broker
CityCan Financial (est 1976)
416-409-8009
http://www.easy123mortgage.ca
paulm@citycan.com
Lic#10532

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