Walk a Kb or Two in my Moccasins- Nobody 'splained it to me like that!

Simple answers to Complex Questions and Complex Answers to Simple Questions. In real life, I'm a Greater-Toronto (Canada) Realtor with RE/MAX Hallmark Realty Ltd, Brokerage. I first joined RE/MAX in 1983 and was first Registered to Trade in Real Estate in Ontario in 1974. Formerly known as "Two-Finger Ramblings of a Forensic Acuitant turned Community Synthesizer"

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Friday, September 24, 2010

What is a variable rate mortgage?

Q......What is a variable rate mortgage?
from Zoocasa Ask the Pros

A..... A Variable rate mortgage should be called a variable "amortization & rate" mortgage.

The pre-agreed payment remains the same throughout the 'term', but as the interest rate ebbs and flows, the "period over which the balance is retired" flows and ebbs (i.e. inversely to the rate change).

Since it's introduction in the early 1980's the "variable" has worked out as the best option (over a 5 yr time-frame)for borrowers - considering both the total payments made & the retirement of principal at end of term.

The advantage of course is that the interest rate "starts out" at about 2% below the fixed 5yr rate - allowing a great deal of flexibility "up" before reaching the 5yr's starting point.

Few first-timers, but many second-time buyers and renewals "go variable".

It's a difficult choice now for mild-mannered risk-averse types ... heck 5yrs at 3.5% or so? Pretty darn cheap.... relatively speaking. Most of the time I've been registered (1974) rates were 9-12%.

But Now IS different.

Rates should stay low until the public catches on that central banks have started intently devaluing their currencies - who knows maybe in 1 yr, maybe 4 or 5yrs.

Try this combination ... take half your mortgage as a variable and the other half as a 5, 7, or 10yr fixed.


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