A fixed rate mortgage is one of the most stable mortgage types. The interest is determined and is set for the term of the mortgage, and homeowners pay one fixed amount throughout the term. The borrower’s monthly payments for interest and principal remain the same for the duration of the loan regardless if Canada prime rate increases. These mortgage rates do not fluctuate as long as the borrower is in a term agreement. The three most common durations to lock-in interest rates are the 1, 3 and 5 year terms.
The advantage of fixed rate mortgages is that you know exactly how much your mortgage payments are regardless of whether rates rise or fall. This makes for easier budgeting and is less risky than a variable rate mortgage. Fixed rate mortgages are most desirable when current interest rates are low.
The variable rate, which can also be called an adjustable rate mortgage or ARM, is the opposite of the fixed rate in that the interest rate may change during the…
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