A fixed-rate mortgage means your interest rate stays the same for the entire time you’re paying back your loan. It’s like having a set price tag on your mortgage that doesn’t change, providing you with steady and predictable monthly payments.

Benefits

Payment stability

Having consistent and predictable monthly payments helps you plan your budget easily without worrying about changes in your payments

Financial planning

Fixed mortgages ensure you know exactly how much you’ll pay off over the loan term. This helps you manage your money and makes it easier to reach your financial goals

No surprise increases

If interest rates go up, a fixed-rate mortgage keeps your payments stable, meaning you won’t have to worry about suddenly having to pay more

Things to know

✔ Payment breakdown: When you make a mortgage payment, some money will go towards the actual loan amount you borrowed (the principal) and the remainder covers the interest charged on the loan. At the start of your mortgage, more of your money goes toward paying off interest. Over time, as your principal goes down, more of your payments will go toward paying down the overall mortgage. It’s like slowly building ownership in your home.

✔ Prepayment penalties: If you choose a closed fixed-rate mortgage, there may be penalties if you want to pay off your loan early or want to make certain changes to it. Before making any changes in your payment plans, be sure to understand your mortgage contract and speak with a financial advisor to learn more.

With a variable rate mortgage, your monthly mortgage payment will be the same but the portions that goes towards interest and the principal can change. If interest rates go up, more of your payment will cover interest. If the interest rate drops, a larger portion of your payment will go towards the principal of your loan. Because of this, how long it will take to pay back your loan is unpredictable.

Benefits

Flexibility in payments

Your payments change based on interest rate fluctuations. During periods of lower interest rates, you may see more of your payment going towards your principal, helping you pay down your loan faster.

Potential cost savings

If interest rates stay low or decrease, you could pay less interest over time with a variable-rate mortgage. This can be helpful, especially when compared to fixed-rate mortgages that maintain the same interest rate throughout the term, potentially resulting in higher overall interest costs.

Things to know

✔ Potential payment increases: Be aware that with a variable-rate mortgage, your payments could go up if interest rates increase. This means if the interest you pay becomes more than what your payment covers, your monthly payment may go up.

✔  Market sensitivity: Variable rates are tied to market conditions. If interest rates are predicted to rise, it might be a sign that your payments could go up too. Keep an eye on economic trends to predict potential adjustments in your mortgage payments.