Differences Between Variable and Flat Rate Mortgages

When it comes to choosing a mortgage, understanding the difference between variable and flat rate options is key to making an informed decision.

Variable Rate Mortgage

• Interest Rate Fluctuates: The interest rate can change based on the prime rate set by the Bank of Canada. This means your payments could increase or decrease over time.
• Potential Savings: If interest rates go down, you could save money on interest payments.
• Risk of Increasing Rates: There's a risk that rates could go up, leading to higher payments.

Benefits of Variable Rate Mortgage:

1. Lower Initial Rates: Often starts with a lower rate compared to fixed-rate mortgages.
2. Flexibility: Potentially lower penalties for breaking the mortgage.

Flat Rate Mortgage

• Fixed Interest Rate: The interest rate remains the same throughout the term of the mortgage.
• Consistent Payments: Payments remain stable, which makes budgeting easier.
• Protection from Rate Increases: Offers security against potential increases in interest rates.

Benefits of Flat Rate Mortgage:

1. Predictability: Provides financial stability with predictable payments.
2. Peace of Mind: Protects against fluctuations in interest rates, ensuring consistent costs over the mortgage term.

Choosing between a variable and flat rate mortgage depends on your financial situation, risk tolerance, and economic conditions. Always consulting with a financial advisor to choose the best option suited for your needs.