Tweet

Fixed Rate Mortgage In Canada – To Go For It Or Not

Written by: Canada Mortgage

Article Overview: Deciding to obtain a mortgage on your home is probably one of the most important decisions you will make in your life. The next important decision is to decide what type of mortgage will be suitable for you – the Fixed Mortgage Rate or the Variable Rate Mortgage. This is never an easy decision as there are no clear cut answers to the question. Home mortgages usually last for long terms such as 5 years or 10 years.

Fixed Rate Mortgage In Canada – To Go For It Or Not

Deciding to obtain a mortgage on your home is probably one of the most important decisions you will make in your life. The next important decision is to decide what type of mortgage will be suitable for you - the Fixed Mortgage Rate or the Variable Rate Mortgage. This is never an easy decision as there are no clear cut answers to the question. Home mortgages usually last for long terms such as 5 years or 10 years. Explaining Fixed Rate Mortgages

If you opt for a fixed rate mortgage Canada (FRM) your rate of interest gets locked for the entire duration of the loan. You negotiate with your mortgage lender and fix the rate of interest in advance. Opting for such a mortgage provides you with the knowledge of what your monthly outgo will be throughout the next 1 year, 5 years, or 10 years, depending on the duration of your mortgage.

If the mortgage interest rates are low at the time you are considering your loan, then going for a fixed mortgage rate Canada is the best option you have. Your payments remain fixed, even if the rates of interest hit the roof. You choose the term of the duration that suits you - either 1 year, or 5 years, or 10 years. You can opt to pay an additional payment each year - some mortgage lenders allow you to pay a maximum of 20% of your initial mortgage once a year. You also have the option of increasing your payments each year - by up to 15%-20% once a year. This will lead to paying off your loan much faster.

Fixed Mortgage Rate Canada is most popular, especially with the laymen; the first time home buyers; and those who are not comfortable with, or do not understand, fluctuations with mortgage interest rates. Moreover, as many as 75% of all home mortgages are available on fixed rates. As the interest rate will never change during the lifetime of the mortgage and nor will the monthly payments, it will allow you to budget your finances for your household and other expenses much easily.

Pricing Of FRMs

Being predictable, the fixed rate mortgages are popular despite the fact that the rate of interest charged for it is always higher than other types of mortgages, such as adjustable rate mortgages. This is because of the inherent risks in the rates of interest. The longer the term of mortgage, the higher will be the rate of interest. Just because the fixed rate mortgage has a higher rate of interest, it does not make a bad option at all.

If the rate of interest of mortgages rises, an adjustable rate mortgage will cost you higher, whereas the higher rate will have no effect on the interest rate of your Fixed Mortgage Rate Canada. Your interest rate and the monthly payment amount will remain unchanged. This is a risk your mortgage lender has agreed to take, and that is why you were charged a higher rate initially.

One advantage, if the rates fluctuate to very lower levels, is that you can go for refinancing of your mortgage. This will enable you to reduce your monthly payments. However, you need to keep in mind that it entails more closing costs.

Mortgage Terms

Though you have the option of choosing a 1 year, 5 year, or a 10 year mortgage for your home, you need to assess which may be the best for you.

Consider this: if you are considering mortgage when you are in your thirties, a 1 year mortgage term may not be suitable because of the higher monthly outgo. If you are considering a 10 year mortgage, you may still have loan on your hands as you approach your retirement age - an uncomfortable thought. In such a case, a 5 year mortgage may be appropriate for you.

A lot, of course depends on your individual circumstances.

What if your wife is pregnant and not in a position to contribute to the monthly payments? Possibly, a 5 year mortgage may be more appropriate, with lower monthly payments and cost of bringing up the baby?

You have a potential of saving on your Fixed Mortgage Rate Canada, and your decision to go for it will depend largely on the loan term, the current rate of interest, and the chances of the rate of interest on mortgages increasing or decreasing during the lifetime of your mortgage.

Related Articles
  Current Mortgage Rates and Trends – Fixed or Variable?
  Factors That Influence Variable and Fixed Canadian Mortgage Rates
  Mortgage Interest Rates In Canada – Fixed Versus Adjustable Rates
  Variable Rate Mortgage – Choosing the Best Deal
  Mortgage Canada rates - some implications and considerations

Article Tags: 10 years, fixed mortgage rate, fixed rate mortgage, Fixed Rate Mortgage Canada, home mortgages, important decisions, mortgage in canada, variable rate mortgage
Referred by: http://www.searchengineworkshops.com



Related Forum Posts
Time to get rich in real estate? - Another thing I'd do if I had a million bucks...or more... would be to start buying up distressed real estate. Sounds ghoulish, I know, but prices are down so much now that anyone who can afford to buy houses and hold onto them until the market "corrects" itself, could make a bundle in a few years. I've been reading a great deal about the current mortgage crisis, and I've got to say that whatever genius came up with the Adjustable Rate Mortgage - and worse, actually persuaded people to buy using it - deserves to be boiled in his own oil and buried with a spring of holly through his heart! What a ridiculous thing - just asking for trouble!
Re: Time to get rich in real estate? - [quote="OmnivoreInk":397sdq49]Another thing I'd do if I had a million bucks...or more... would be to start buying up distressed real estate. Sounds ghoulish, I know, but prices are down so much now that anyone who can afford to buy houses and hold onto them until the market "corrects" itself, could make a bundle in a few years. I've been reading a great deal about the current mortgage crisis, and I've got to say that whatever genius came up with the Adjustable Rate Mortgage - and worse, actually persuaded people to buy using it - deserves to be boiled in his own oil and buried with a spring of holly through his heart! What a ridiculous thing - just asking for trouble![/quote:397sdq49] I've gotten into a few loans that I didn't check the terms as thoroughly as I should have, but its hard to imagine someone signing deed of trust papers for that amount of money for 30 or so years and not understanding the terms. I would never want an adjustable mortgage - even before these latest problems, the financial system is unpredictable. Things can change A LOT in 30 years - look what happened in 4 or 5 years. Chris
Accessing the Canadian Market - Leo, an idea that came to mind is try to align yourself with Hispanic Organizations in Canada. This will build your credibility within communities and get more referrals. Not sure if you plan on being based in Canada or operate your business from Columbia but either way being in the web development arena allows you to work from anywhere. You can also search for opportunities originating from Canada thru elance.com, getafreelancer.com, freelance.com or rentacoder.com
Re: Hi - Thanks guys! I have been helping Real Estate and Mortgage professionals generate leads from the Internet for 5 years now!. I'd be glad to exchange some ideas. Have a great day=)
Re: Introducing a US franshise to a Canadian market - [quote="BuzzAroundBooks":1l00q6iy]Hi Everyone, If there was a franchise you liked and located exclusively in the U.S., how likely would you be able to introduce the first one in a new market like Canada? How open are franchisors to this sort of idea? Has anyone heard how this was done in the past?[/quote:1l00q6iy] US franchisors are really open to "export" their concept to Canada for 2 main reasons: the proximity and the culture: Canada is just a few hours away from any US city and both cultures are very similar. I am actually reading stats on this subject as I write and about 80% of american franchises tat go international go to Canada first.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

The Right Job - Part Five 'Compensation'

Do You Deserve To Be Happy and Successful?

What should your free giveaway be?

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.