Can you save a year's salary with a variable vs fixed rate mortgage?

Fixed rates are typically higher than variable rates.

That's because you're paying more for the security of knowing that your fixed rate is guaranteed not to go up, and therefore your monthly mortgage payments won’t increase during your term.

But despite the variable risk of increased payments, these variable savings are a little hard for some to ignore and it’s been turning the mortgage-rate choice upside down.

Why is your rate type such a big decision?

Each rate type has a different impact on your mortgage affordability and monthly budget. Typically, most Canadian home buyers prefer fixed rates and the budget certainty they provide. Before the pandemic, about 60 percent of clients went with fixed, and around 30 percent chose variable. Now? Thanks to the increasingly-large spread between these two rate types, over 55 percent have sided with the savings of a lower variable rate. That includes first-time buyers, who face a bigger hurdle to get into over-priced housing markets, and have chosen higher savings over budget predictability.

What rate type is best for you?

Despite the obvious savings right now, it’s not necessarily a slam-dunk decision. The choice can come down to your financial situation, mortgage qualification details, and comfort level with changing rates and payments. Not everyone has the ability to adjust their budget to the varying nature of a variable-rate mortgage. A fixed-rate mortgage may come with a higher rate, but for those whose monthly budget is ‘king,’ the extra cost may be worth their (mortgage) while.

The good news? You don't have to make this decision alone.

A highly-trained mortgage broker in your corner can help you outline all your options, and provide access to several lenders on your behalf to get your best-possible rate — variable or fixed — with a flexible mortgage that fits you. In fact, the right broker can also help you see the fine print of your 'low-rate' mortgage, to ensure it doesn't come with hidden restrictions or fees that end up costing you more than you planned.

While you’re thinking about your rate type, rates may go up.

At True North Mortgage, we have access to several lenders, including our own in-house lender, THINK Financial. We’ve seen several fixed rate increases over the past few weeks, as lenders respond to market conditions. If you contact us today or apply online, we can hold your best rate (for which you qualify) for up to 120 days, to protect against further increases (for a little while, at least).

Take our Compare & Save Calculator for a spin (below) to see your rate savings.