Personal Finance

Variable or fixed for refinance

  • Last Updated:
  • Jun 15th, 2018 4:34 pm
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[OP]
Newbie
Jan 8, 2017
55 posts
8 upvotes

Variable or fixed for refinance

Looking to renew my mortgage

Variable or fixed for refinance???

Anylp would be appreciated
10 replies
Jr. Member
Oct 21, 2016
179 posts
25 upvotes
Variable go with the lower interest rate
Deal Addict
Jan 15, 2017
1655 posts
1131 upvotes
Some questions that need to be answered:

1. What do you currently have? Have you been happy with it?
2. How long to you plan to remain in the home?
3. Who is the lender? What are your pre-payment penalties should you have to break the mortgage early?
4. What is your risk tolerance? How will you feel when if you select variable and rates increase during the term
5. What are the terms and conditions of your variable? Some lenders do not increase your payment when interest rates increase, with the end result being a higher mortgage balance owing at the end of the term. Would you be okay with this?
Deal Fanatic
User avatar
Feb 2, 2014
5375 posts
1132 upvotes
Toronto
aprilgermany wrote:
Jun 13th, 2018 9:18 am
Looking to renew my mortgage

Variable or fixed for refinance???

Anylp would be appreciated
Best variable rate is 2.16% 5-year variable (Prime -1.29%) and best fixed rate is 3.14% 5-year fixed.

I like variable. Rate is obviously low. But I like that you can convert to fixed at any time AND penalty is capped at 3 months of interest.

But yes, look at your risk tolerance, as variable rate can change.
Kevin Somnauth, CFA
Mortgage Agent and Real Estate Sales Representative
Deal Addict
Apr 5, 2016
2536 posts
1327 upvotes
Calgary/Vancouver
I prefer variable now since the spread is 100 basis points. That would usually mean Prime Rate has to increase 4 times before it becomes par with current fixed rate judging by previous rate increases at 25 points each.

Back then when the different between variable and fixed was 30-50 points, then you may want to go fixed.
Current Fido customer.
Ex Koodo customer. Beware of their tactics.
Deal Addict
User avatar
Jan 27, 2007
4978 posts
881 upvotes
Peterborough
Variable, but base your payment on the fixed rate.
Sr. Member
User avatar
Jun 15, 2005
907 posts
98 upvotes
bomber17 wrote: I prefer variable now since the spread is 100 basis points. That would usually mean Prime Rate has to increase 4 times before it becomes par with current fixed rate judging by previous rate increases at 25 points each.

Back then when the different between variable and fixed was 30-50 points, then you may want to go fixed.
Not to mention those 4 rate increases of 25 basis points all have to occur early in the mortgage term or the total interest paid is still better with the variable rate.
Deal Fanatic
Nov 24, 2013
5107 posts
1715 upvotes
Kingston, ON
Arkaine wrote:
Jun 13th, 2018 9:31 pm
Not to mention those 4 rate increases of 25 basis points all have to occur early in the mortgage term or the total interest paid is still better with the variable rate.
True. Though, worth noting if we get an increase next month, that will have been four 25pt hikes in the last 12 months, so it's not outlandish.

I'm guessing it'll be a while before the next hike after July, but July's basically a given at this point.
Newbie
Jan 30, 2013
57 posts
17 upvotes
CdnRealEstateGuy wrote:
Jun 13th, 2018 12:17 pm
I like variable. Rate is obviously low. But I like that you can convert to fixed at any time AND penalty is capped at 3 months of interest.
I don't think there are any variable rate with locked-in term mortgages required to pay interest penalty to convert to fixed rate as long as the converted term is equal or longer than the remaining variable rate mortgage. Generally banks charge the higher of 3 months interest or interest rate differential. Off the top of my head, this still applies to variable rate locked-in term mortgages, perhaps, the interest penalty is usually higher than interest rate differential...
Sr. Member
Nov 18, 2015
883 posts
377 upvotes
im going variable starting july. even with all the trade talk and so forth im sure the rates wont rise much. still cheaper then fixed.
Deal Fanatic
User avatar
Feb 2, 2014
5375 posts
1132 upvotes
Toronto
Phatboy18 wrote:
Jun 14th, 2018 1:39 pm
I don't think there are any variable rate with locked-in term mortgages required to pay interest penalty to convert to fixed rate as long as the converted term is equal or longer than the remaining variable rate mortgage. Generally banks charge the higher of 3 months interest or interest rate differential. Off the top of my head, this still applies to variable rate locked-in term mortgages, perhaps, the interest penalty is usually higher than interest rate differential...
No, you can convert penalty-free.
Kevin Somnauth, CFA
Mortgage Agent and Real Estate Sales Representative

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