Real Estate

5y Mortgage: Fixed or Variable?

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  • Sep 5th, 2015 5:16 pm
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[OP]
Deal Addict
May 7, 2006
2114 posts
77 upvotes

5y Mortgage: Fixed or Variable?

We are planning to take a 300k mortgage for 5 years.

Is it better to take a fixed mortgage at 2.69% or a variable at 2%?

Over 5 years, the difference would be 17.6k assuming biweekly accelerated payments and no pre-payments.

Nobody can predict how rates will go, but 5 years seems like a lot of time for interest rates to go up?

Thanks
40 replies
Deal Expert
User avatar
Oct 26, 2003
34631 posts
4089 upvotes
Winnipeg
i went with variable

when i did fixed before the interest rate always went down, and these days we have worse economic than few years ago
Deal Fanatic
Mar 24, 2008
6009 posts
2279 upvotes
Toronto
Variable

I went fixed 3 years ago and regret it since. Oh well, 2 more years to go.
Illegitimi non carborundum
Deal Addict
User avatar
May 17, 2007
3640 posts
755 upvotes
Burnaby
Variable. And there are better rates than 2%.

(I do mortgages )

Bonus of variable is being able to lock into a fixed if prime increases.
Deal Addict
Nov 6, 2007
1373 posts
661 upvotes
North York
I got 1.95% from one of the big banks for closing this month.
Member
Aug 17, 2008
477 posts
201 upvotes
Quebec
17.6 k over 5 years? 0,69% difference is 2070 $ per year at 300k. How do you get to 17.6 over 5 years?
Sr. Member
Dec 19, 2011
531 posts
154 upvotes
If you've got some equity as a buffer, go variable. Rates are going nowhere. Even if they do go up it'll be slow and incremental, not more than 0.25% each time.

If you panic when your portfolio drops 3% in a day, go fixed. You gotta sleep well at night. :)
Member
Mar 4, 2015
401 posts
41 upvotes
Montreal, QC
I would do fixed since interest rates are low and everyone "claims" they will be going up. Its also up to you about how much risk you are willing to take
Deal Addict
Jan 27, 2015
1037 posts
462 upvotes
Edmonton, AB
Rates won't be going significantly up any time soon. Historically, going with variable rates is better than fixed rates especially if you have decent equity in your home.

I went with variable and have not regretted it one bit.
Deal Expert
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Jul 5, 2004
25216 posts
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KDivers wrote: I would do fixed since interest rates are low and everyone "claims" they will be going up. Its also up to you about how much risk you are willing to take
But even if they do go up, they would have to go up quite a bit past 2.69% for the OP to start losing money, since he'll be saving money the entire time rates are below 2.69%. Of course there's an element of predicting the market, which is impossible, but the faster the rates rise, the worse our economy is going to end up due to a potential housing collapse. I just can't see it happening.
Deal Expert
Feb 29, 2008
25666 posts
3186 upvotes
Montreal
I took 2.44 for 4 years fixed. Should have a gone variable. Canada's economy is going to be the crapper a long time. With variable you should be ahead for a year or two.
Deal Expert
User avatar
Aug 2, 2010
15193 posts
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Here 'n There
aokec wrote: We are planning to take a 300k mortgage for 5 years.

Is it better to take a fixed mortgage at 2.69% or a variable at 2%?

Over 5 years, the difference would be 17.6k assuming biweekly accelerated payments and no pre-payments.

Nobody can predict how rates will go, but 5 years seems like a lot of time for interest rates to go up?

Thanks
Depends if you want certainty or not. As for rates, it's a gamble either way.
Member
Sep 4, 2009
361 posts
140 upvotes
KDivers wrote: I would do fixed since interest rates are low and everyone "claims" they will be going up. Its also up to you about how much risk you are willing to take
5 years ago "everyone" said the same thing. Rates would be going up. No one saw rates going down.

Now "everyone" thinks rates will stay or go down even more. Pft! No one knows.

I chose variable because that is what I am comfortable with and I can handle the extra costs if rates do go up. It also has proven to be the better choice over the long haul.

But that is not for everyone. Some people want absolute certainty. So fixed it is for them.
Sr. Member
Feb 28, 2009
554 posts
392 upvotes
Ottawa
Take variable but keep the payments as if you were payi 5 year fixed!
Deal Guru
User avatar
Jun 12, 2003
14885 posts
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Markham
I've read that the U.S. Federal Reserve Bank could raise interest rates as early as September.. Would Canada follow?
ShadowVlican
Penalty Box
Apr 16, 2012
3565 posts
685 upvotes
Greely
If you think interest rate WILL go up in 5 yrs = go fixed

If you think interest rate will go DOWN = go variable

If you aren't sure = go variable

Everyone who was so sure real estate would crash and interest rate will soar are sitting here licking their wounds (either from overpaying their mortgage due to going fixed or still renting)
Deal Addict
User avatar
Jan 13, 2012
1110 posts
48 upvotes
Sudbury
jacksorbetta wrote: Variable. And there are better rates than 2%.

(I do mortgages )

Bonus of variable is being able to lock into a fixed if prime increases.


Depends on one's risk tolerance. I hedge my rental unit with a variable mortgage, but my primary residence with the partner is fixed.
Member
Mar 4, 2015
401 posts
41 upvotes
Montreal, QC
Chasem wrote: 5 years ago "everyone" said the same thing. Rates would be going up. No one saw rates going down.

Now "everyone" thinks rates will stay or go down even more. Pft! No one knows.

I chose variable because that is what I am comfortable with and I can handle the extra costs if rates do go up. It also has proven to be the better choice over the long haul.

But that is not for everyone. Some people want absolute certainty. So fixed it is for them.
No one knows - its all speculation. If interests rates go up one has to account for that and not everyone can afford the risk. If you can afford the risk absolutely do variable.
Member
Mar 4, 2015
401 posts
41 upvotes
Montreal, QC
Shaner wrote: But even if they do go up, they would have to go up quite a bit past 2.69% for the OP to start losing money, since he'll be saving money the entire time rates are below 2.69%. Of course there's an element of predicting the market, which is impossible, but the faster the rates rise, the worse our economy is going to end up due to a potential housing collapse. I just can't see it happening.

People also couldn't see the US crash in 2008. Few did but not the average person. I don't know what will happen. I hope you are right and the housing market won't collapse and interest rates will stay low. I can't predict the future 100%. I think it depends on how much risk someone is willing to take based on the information you have at the time.
Deal Expert
Feb 29, 2008
25666 posts
3186 upvotes
Montreal
Look at the four year fixed terms. They are lower than the 5 year terms, and closer to variables.

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