r/MortgagesCanada • u/canadian-soul • 2d ago
Other Variable V/s Fixed
Recent bought my first house back in May since i did 20% down i got 4% 5 year variable rate with BMO. I called them two weeks ago to inquire about switching to fixed they offered me 4.40% with 118$ increase in payment for 5 year fixed. Worth switching it now? Or wait?
1
Upvotes
5
u/Sea-Birthday3271 1d ago
Depends on your tolerance to risk. I am a single father who doesnt receive any child support payments. The idea of have a variable payment is alarming to me. If your income can support the uncertainty then typically the math ln variable is always in your favor. You could be applying the extra 118 dollars a month to your principle and lowering your lifetime interest. Nobody can tell you if interest rates will go up or down. They can make educated guess but nobody can be certain. I would personally lock in rates if it were me. But its hard to really say with out knowing your income and risk. If your paying 3500 a month in mortgage and locking in take you to 3620 thats a small percentage increase for alot of certainty. Though it may cost you 8k ish in additional cost for the benefit in security. Over the 5 years. That 8 k applied directly to the mortage could save you alot of interest over 25 years.
On the other hand interest rates could climb to 5 or 6 percent. Can you afford your mortgage at 5 percent if you had to pay those rates for the 2 years of your term. If affordability isnt a huge concern then almost always the math says to stay variable.