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One of the most important choices you’ll make
One of the most important choices you’ll make when you conclude your mortgage is whether to choose a variable or a fixed interest rate. Which you choose will depend pretty much on your personal circumstances, and in what direction you believe that the interest rates will move over the short to medium term. Certified Mortgage Broker provide’s you the best Fixed mortgage rates in Barrie.
Variable interest rates are typically lower over the longer term, but you run the risk of interest rate increases which will either increase required monthly payments or the amortization period depending on the terms and conditions of your mortgage. Right now, variable rates are almost 1% lower than fixed, but most Canadians prefer the stability of a fixed term mortgage and more than fifty per cent of mortgages in the country are fixed.
The expert staff at Certified Mortgage Brokers Barrie understand the economic fundamentals that drive interest rate fluctuations, and they can combine this knowledge with information on your personal circumstance to help you to choose the best mortgage product that meets your needs and expectations.
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The Advantages of Fixed Mortgage Rates
A fixed mortgage usually runs for periods of between six months and ten years, and some run for even longer periods of time. During the term of the mortgage the rates, and by implication, the repayments will remain unchanged. This means that you can comfortably budget without losing sleep over interest rate hikes.
For the lender, fixed mortgage rates are riskier than variable rates, and this is reflected in the higher rate charged for the fixed term mortgage. The interest rates on fixed mortgages in most cases are linked to the performance of government bonds of a similar term. The bond rate represents the cost of funds to banking organizations. The difference between the cost of bonds and the interest rates charged is determined by competition between financial institutions.
Your income, level of debt and tolerance to risk will be a determining factor in deciding whether a fixed mortgage is the product for you. If you cannot take the risk of interest rate increases then a fixed rate is the right option for you. Depending on your financial situation, it is usually easier to obtain approval for fixed mortgages.
Opting for an open or closed fixed mortgage on your Barrie property
If you opt for an open fixed mortgage you’ll be able to opt out of the mortgage at any time, repay as much as you like or renegotiate another mortgage. Although these products are more expensive than closed fixed mortgages they are ideal for those who are considering selling, want to pay off more than 20% of the principal or believe that interest rates are likely to fall in the short to medium term.
A closed fixed mortgage is a cheaper product with payments and interest fixed for the term of the mortgage. The downside of these products is that you are locked in for the term, and you will pay penalties if you break the contract. Penalties can be substantial, as they are calculated at the higher of three months interest or the interest differential.
The average term of a fixed mortgage is five years. Shorter terms typically have lower interest rates but longer terms offer long-term predictability.
At Certified Mortgage Brokers Barrie, we can help you to choose the mortgage with the best term and the right rate to suit your lifestyle and your budget.
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