Post # 1
DH and I keep flip flopping what looks best and when the time comes things might also change a bit.
I’ve heard one person’s rule of thumb is for there to be 1.5% diff between the 5 yr fixed and variable before going with the variable, otherwise the risk just isn’t worth it.
How did you decide your term? How much of an interest rate difference were you willing to pay to get more flexibility?
Obviously there are no right answers, but seeing some opinions might help me strength some of my choices!
Post # 3
I knew I wanted a 30 year fixed. I faxed my info to 3 different banks and the credit union wound up having the best rate and service so I picked them!
Post # 4
Unless you are a professional investor and can read and (try to) predict the market, a variable rate mortgatge doesnt really make sense. ESPECIALLY, since rates are so low right now and wont likely be going much lower, but are more likely to increase. One would generally choose a variable rate if it were a decreasing interest rate environment.
Pkus, its hard to predict your budget/cash flow at any given time making life a bit more difficult.
EDIT: Also, be sure you could hypothetically afford to pay twice what you would pay now for a mortgage at a variable rate mortgage- that easily can happen and force you to sell if you cant afford it.
Post # 5
We have a 30 yr fixed. The rates were so low as it was and the likelihood of them jumping in the future was TOO high. A year and a half after we bought our house the rates dropped again and we did a no cost refinance for another 30 yr fixed. I honestly don’t see any benefit (long term) to a variable.
Post # 6
OP – We went with the 30-year, fixed that gave us the best interest rate.
Post # 7
@AB Bride: The broker gave us several options – Since the fixed rate we were able to get back in 2009 was 3.14% for 3 years on our house and 2.99 for 4 years on our rental in 2012, we went with that. We were able to renew at 2.99 for another 4 years on our home when we were up for renewal in September, so now it’s even lower.
We decided against variable rates for a couple reasons. The fixed rate was too good to pass up for one, and it’s nice to know exactly what you’re going to be paying each month.
My sister was just able to get a 5 year for 2.89% which is the lowest I’ve ever seen.
I see that you’re in AB – I am too and I have a great broker in Calgary if you’re interested 🙂
There are 30 year fixed mortgages?! Is it different in the States or are we just saying it differently? We started with 25 year amortization, and at the end of your mortgage term, you have to renew – usually 1,3,4 or 5 years. Also, by paying bi-weekly instead of monthly, we were able to shave a few years off our mortgage, plus save a ton in interest. I would definitely look into that too if possible.
Post # 8
@Ryansgirl: In the US it tends to be 15 vs 30 years, similar to our 5 year rates. So unfair, huh?
DH and I are actually considering 10 years (which are Canada’s longest terms offered by most lenders, I think I’ve seen 1 that does 15 years).
We’ll be doing accelerated biweekly as long as the lender allows it!
Post # 9
Maybe I should ask bees from other countries to be a little more hypothetical. How much of a rate difference would there have to be between the terms available here?
Or how big of a rate difference would there have to be to pick a 15 year over the 30?
Also what about other options? DH and I are considering getting a longer amortization period as long as we can pay it off as we choice, just to be safe. Would anyone be willing to pay a higher rate to have an amortization period longer than 25 years? If so, how much?
Post # 10
@AB Bride: That’d be awesome if you could get a good 10 year rate! Best of luck on your search
Post # 11
@Ryansgirl: Thanks! They have been below 3.7% at many lenders in the last month or so.
Was your broker independant or with a company? I’m in Edmonton, but if you went with a company that might be helpful!
Post # 12
I would always pick a fixed over variable unless the rates were really high. We choose the longest (30 yr) because we figured if we had the funds and wanted to pay it down faster we would. But we didn;t want to be stuck with a higher monthyly payment and not be able to pay it.
We choose a loan also based on downpayment and PMI (Private Mortgage Insurance). So our interest was higher, but we were able to get a loan with 0% down and no PMI (if your equity in the house is less than 20%, you have to pay PMI which for us would have been $200-$300/month)
Post # 13
I would definitely pick a fixed rate. We chose 30 year fixed. I figured that way we would have the flexibility to pay more during months that we could, but have a lower overall payment.
Variable rate is really scary, especially with the interest rates so low right now. They have been low for a while, but are bound to go up. My parents bought their first home in 1980 and they remember their interest rate being over 14% at the time. In my line of work, I have seen a lot of people with adjustable rate mortgages lose their homes because they couldn’t afford the payments. Just something to think about!
Post # 14
@AB Bride: I feel like the US and Canadian systems are so different, it is almost impossible to compare.
Post # 15
Honestly, right now I would not go for a variable rate mortgage. Rates are at all time lows and only have one direction to go. Plus since the real estate market is still weak, it might be hard to refinance in a few years when the variable rate does go up.
Post # 16
@AB Bride: I am also in the Edmonton area. We used a mortgage broker to get all our options, that way we wouldn’t miss out on mortgages available from your non typical lenders. I am glad we did because the lowest interest rate we could get was not from a local bank! We used Lynn Gordon and were really happy with her. I would also not recommend variable. Rates are pretty low still and you have to be dedicated tto monitoring your variable mortgage