You heard it here first!… Rule of thumb for choosing Variable over Fixed.

 For the past few years, the Bank of Canada has warned us about the imminent interest rate hikes.   Reminds me of the boy that cried wolf.    “Interest rates are going up…  soon!…  real soon…. really, really soon!!”   But last week, the new Bank of Canada Governor, Stephen Poloz, surprised many experts when he said rates would remain low for quite a while.

This announcement prompted many advisors to jump on the Variable Rate bandwagon and start recommending Variable rate over Fixed rate.   I agree…  Variable rate is the obvious choice for most of us today.   But I also noticed a familiar rule of thumb being quoted in the media.   So I wanted to set the record straight.

For years, I’ve been advising my clients and readers there are several things to look for when choosing a Variable rate mortgage. One of my big rules of thumb is there should be at least a 1.00% spread Variable rate and 5 year fixed rate.  Anyone that’s followed this site will recognize this rule.   Remember, you heard it here first!

You also need to be careful about which Variable rate product you choose.  The one with the lowest rate could end up costing you $$thousands more.   Be alert.   Not all Variable Rate mortgages are alike.

Here’s another tip…  it’s good to shop for the best rate….of course we all want the best rate… Use a broker! Get someone to help when you do it.  Trying to find the best mortgage product on your own is almost impossible.  Just because you see a lower rate advertised, it doesn’t mean that product is the best.    In recent years, we’ve seen far too many borrowers choose a mortgage based on the rate, only to discover that mortgage had inferior terms, restrictions, limitations and privileges that ended up costing them $$thousands down the road.

Don’t get trapped!   Use a non-bank employee that is unbiased and has access to dozens of Lenders and Banks. Use someone that will explain the differences between products and Banks.   Use a Mortgage Broker.    You heard it here first!

Your best interest is my only interest.

As always, I welcome your comments, calls and questions.

Steve Garganis 416 224 0114 steve@mortgagenow.ca