A floating interest rate, also known as a variable rate or adjustable rate, refers to any loan that is not fully fixed, but rather shifts with any changes to the Bank of Canada’s overnight policy rate. There are two types of variable rate products: ARM – Adjustable-Rate Mortgage AND VRM – Variable Rate Mortgage When deciding on what variable rate product works best for you and your family, it’s best to ask yourself if you are more comfortable with a fixed monthly payment or paying your mortgage off on the agreed upon amortization. (See our variable rate mortgage section for more) While both options are…

Within a fixed rate mortgage, you will have the security of knowing that your mortgage payment and interest rate will not change throughout the contractual term. In exchange for a fixed rate term, your lender will apply a higher pre-payment penalty should you decide to switch lenders, refinance, or reconstruct your mortgage before your mortgage term is up.

The Bank of Canada meets 8 times each calendar year to analyze the Canadian economy and to decide on whether they should lower the overnight rate, raise the overnight rate, or keep rates neutral. At these meetings, the BoC will also announce any policy changes or updates that would otherwise affect the general Canadian economy. Historically, the government does not make changes to the overnight rate when they meet. Over the past 10 years, we’ve seen the variable rate stay fairly flat, with minimal fluctuations.

If you have a mortgage today, your payment will change approximately $12 - $13 for every $100,000 that you owe on your mortgage. So, if you have a mortgage balance of $500,000, and the Bank of Canada changes their overnight rate by 0.25% - that will be an increase / decrease of about $60 to your monthly payment. Note, a typical increase made by the BoC is usually 0.25%. If your interest rate were to double – that would mean your payment would increase by 25%. If your interest rate were to triple – that would mean your payment would increase by 45%. A…

Fixed Rate Mortgage Pro’s Fixed rates give the borrower the certainty of a static payment each month. In a rate rising environment, your payment will not move. Fixed Rate Mortgage Con’s Fixed rates are less flexible & result in larger penalties if you break your mortgage Once you choose a fixed rate mortgage, you cannot move over to a variable Variable Rate Mortgage Pro’s Variable mortgages will provide borrowers with the most flexibility. A variable mortgage payment may go up, but it can also go down A variable mortgage rate is typically offered at a lower rate than fixed The variable rate mortgage has historically outperformed the fixed rate mortgage Borrowers…