Information on the variable rate mortgage product

The Variable Rate Mortgage is probably the mortgage product that people least understand.

As with the HELOC,(Home Equity Line of Credit) this product is linked to bank prime, but unlike the HELOC, the rate for a variable mortgage is usually below bank prime. The percentage that it is below bank prime varies from one financial institution to another. It is a good idea to look around and get the necessary information from different institutions before making your decision.

A mortgage broker will be very helpful with doing this, and will definitely safe you the legwork.

You can lock in a variable rate mortgage for three or five year term. Your monthly payment will consist of a combination of principal and interest repayment. You have no option to make interest only payments.

Your rate will usually be adjusted every three months to reflect the current bank prime rate. If prime went up in the preceeding three months, your rate will be adjusted to reflect this and this will result in an adjustment to your mortgage payment ratios.

If interest went up, you will pay down less on your principal and more on your interest. If rates went down, you will pay down more on principal and less on interest.

With the variable rate mortgage product, your monthly payment will stay the same over the term that you choose, only the ratios will fluctuate.

With the current trend in mortgage rates, this is a pretty safe mortgage product to choose.

The Pros of the Variable rate mortgage:

Your monthly payment stays the same
Rate is usually quite a bit lower than with a fixed term because you will get prime minus something.
You pay down both principal and interest
After the first three years the mortgage is open, which means it can be paid out without a payout penalty. This is huge, you can literally save thousands on payout penalties with this product.
You can lock it in to a three or five year fixed term at any point without any penalties.
It is transferable.
It is portable

The Cons:

You do not have complete control over the rate.
You can end up not making any principal payments if the bank prime rate goes up too much.

If the Variable Rate Mortgage is not quite suitable for your situation, please learn more about other mortgage products, that may be better suited to your situation.

If you have any questions regarding the Variable Rate Mortgage, please do not hesitate to contact one of our specialists, for more information.

To learn more about mortgages in general before making your decision, please return to our home page, and pick a topic to learn about.

Understanding The Variable Rate Mortgage.