Go Variable or Fixed rate?

Your choice of a mortgage can save you, or cost you, a mint. Problem is that in deciding you're also gambling.

Would you pay $100,000 to sleep a little easier at night? You can crunch the numbers different ways, but that's the kind of real money at stake when you choose your mortgage.

If you select one with a variable rate - that's a mortgage when the interest rate can go up or down, in tandem with base lending rates - you could save thousands of dollars in interest over the life of your mortage.
That's because these rates tend to be the lowest on the market. But you could also lose sleep at night if rates go up and your amortization increases.

If you choose the fixed rate, you can be certain the interest rate won't change over the term of your mortgage, but you will pay more if rates are reasonably stable or go down.

There is a third option - mortgage products that blend variable and fixed rates - though consumers need to be aware of the pros and cons.

Consumers also need to be aware they can bargain, playing off banks and brokers against each other, asking for below published rates. A mortgage is a big-ticket item where sellers have leeway to discount and competition among them gives consumers leverae. By bargaining, you might be able to get a fixed rate mortgage for pretty close to a varaible rate deal.


The Toronto Star B, Madhavi Acharya-Tom Yew.