Many will argue that Variable interest rate option is the best to choose.  While there are many benefits to Variable rates, fixed interest rate option is equally attractive to some for their own reasons. Depending on the times housing market, you could potentially lose or save money.  It is important to discuss the benefits of both types of rates with a mortgage specialist prior to making your final mortgage decision.

Variable rates can be very attractive in times when the interest rates are low and the economy is suffering through a period of slow growth.  During these times The Bank of Canada will reduce the interest rates in order to stimulate the economy.  It is felt that this will give buyers incentive to buy, injecting the economy through spending.  This is of course awesome for the home buyer who chooses a variable rate, as this will ensure low mortgage payments.  There is a down side however to choosing a variable interest rate. When interest rates begin to rise again, so do your weekly, bi weekly or monthly mortgage payments.

Choosing a fixed rate mortgage at the right time can be very beneficial.  If you choose a fixed rate when rates are low, you have the advantage of paying lower mortgage payments at the same low rate for the duration of your mortgage term, regardless of whether the lending rate raises.  The downside borrowing on a fixed rate term is that if you choose a fixed rate when rates are high and rates lower anytime during your term, you unfortunately will not reap the benefits and will lose the money that you may have saved had you chosen a variable rate.

Even though there are many pros and cons when either type of interest rate is chosen, one must consider such things as the inconsistent mortgage payment amounts when a variable rate option is chosen.  For this reason, a fixed rate mortgage is most attractive as some people prefer to know that every mortgage payment will be the same and can therefore plan finances accordingly.  An upside to choosing a variable rate is that in the event that rates drop, the borrower can always lock the rate in and switch to a fixed rate at any time during the course of the mortgage term.  Fixed rates are not flexible in this way.  Once you have chosen a fixed rate, you are locked into this rate whether interest rates decline or increase.

One can argue the benefits of either type of interest rate.  However lifestyle, personal preference and many other factors will dictate which type you choose.  Speaking with a trained mortgage specialist will help you make a decision which that best suits your needs.

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