Interest Rate Options

Fixed or variable rate?

With a fixed rate mortgage, you get the security of knowing that the interest rate on your mortgage won’t rise during the term you have chosen, even if interest rates increase. Because the principal and interest are predictable, you’ll know exactly how much principal you will owe at the end of the term. Terms range from 6 months to 18 years.

With a variable rate mortgage, the interest rate moves up and down with Bank of Montreal’s Prime Rate. Your monthly mortgage payments remain the same throughout the term of the mortgage. What changes is the amount of each payment that’s applied toward the principal versus the amount applied to the interest. So, if interest rates rise, less of your payment goes to paying off the loan because the interest costs are higher. As a result, your amortization period during the term of the variable rate mortgage may be longer than you originally selected if rates have risen since the start of the term, or shorter, if interest rates have fallen.

Your payment is adjusted when you renew the term of your amortization, so that you will always pay off the mortgage within the original amortization selected at the set-up of the mortgage.

We can help you understand the pros and cons of fixed and variable rate mortgages, based on your personal and financial goals.

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