Fixed vs. Variable: Key Mortgage Renewal Options Explained

Oct. 15

Is your mortgage up for renewal? Here are some key options for you to consider.

If you're thinking about a fixed-rate mortgage, this option provides stability with a consistent interest rate and predictable monthly payments throughout the term. It’s a great choice if you prioritize peace of mind or are concerned about potential rate increases. However, with interest rates not expected to rise soon, locking in a fixed rate may not be as urgent right now.

On the other hand, variable-rate mortgages could offer more flexibility. With interest rates expected to decrease in the near future, a variable rate might allow you to take advantage of potential savings over time. If you're comfortable with some fluctuation in your monthly payments and have flexibility in your budget, this could be a smart financial move.

Understanding the Difference: Variable-Rate Mortgage (VRM) vs. Adjustable-Rate Mortgage (ARM)
When choosing between a VRM and an ARM, it’s essential to understand their differences.

A Variable-Rate Mortgage (VRM) keeps your monthly payments the same, but the portion of your payment that goes to interest versus principal will change when the lender's prime rate fluctuates. This means that when rates rise, more of your payment covers interest, and when rates fall, you pay down more of the principal.
An Adjustable-Rate Mortgage (ARM) adjusts both your interest rate and your monthly payment. As rates increase, so will your monthly payment, and when rates fall, your payments decrease.

Which is Right for You?
Choosing between a fixed or variable rate depends on your financial situation and risk tolerance. If you prefer stability, a fixed rate might be ideal, but if you want to benefit from potential rate drops, a variable rate could lead to more savings.

I'm here to guide you through this important decision. Feel free to reach out if you have any questions or need assistance with your mortgage renewal!

By carefully weighing the pros and cons, you can ensure you're making the best decision for your financial future.