What is the difference between a fixed and a variable mortgage? And which one should I choose? This is a common question. Currently, our interest rates are at all time lows. It is almost a shame not to be borrowing money. Real Estate is proving to be a great investment in Vancouver as other investments such as GIC’s and term deposit’s are proving to be less lucrative.

The biggest difference between the fixed and variable mortgage is that a fixed term mortgage gives you the security of knowing exactly how much your interest payment will be for the next 1,2,3,5 or even 10 years. The interest will be “locked in” as they say and will not change over the term. A variable mortgage is one that can change at any time and can go in either direction. As I mentioned, our rates are currently at all time lows, so the obvious choice of late has been the variable side.

One thing many do not realize with a fixed term mortgage, is that should you decide to sell your property prior to the end of your “locked in” term, you will be required to pay a penalty based on the difference in interest rates from your locked in rate and the current rate. If you are to purchase another property, you can simply transfer the mortgage to the new property without penalty, however, if you would like to sell your property and get out of the market for whatever reason without purchasing again, a penalty will be incurred. If you are purchasing real estate in the hopes of selling quickly and not knowing where the next deal might be, the best option for you would be what is called an “open variable” mortgage. This allows you to sell the property without penalty at any time.

Our interest rates are not expected to climb much in the next six months if at all. They will rise eventually and it is important to stay in communication with your mortgage rep for a heads up of when might be a good time to lock in at these great rates before they start to increase. I always say that Real Estate is a wise long term investment and if you can lock in and hold on to your property, you can really take advantage of these low rates.

My network includes many mortgage brokers, including a select few that I use on a consistent basis. If you have questions about getting pre-approved for a mortgage or you curious about your current mortgage, simply send me an email at wesleybehan@remax.net and I would be happy to assist you.