What Is a Fixed-Rate Mortgage?
In Canada, fixed mortgages are by and large the most popular loan type among homebuyers. In essence, a fixed-rate mortgage is a straightforward loan payment plan where the interest rate is locked in place from beginning to end. Fixed rates ensure constant, steady payments, which is ideal for applicants with a strict or set income.
What Are the Term Lengths Available for Fixed-Rate Mortgages?
There are a plethora of fixed-rate term lengths available to mortgage applicants. Among the most common term lengths are:
- 1-year
- 3-year
- 5-year
- 10-year
- 15-year
- 25-year
It’s useful for prospective home buyers to understand the connection between term length and interest rates. Generally, interest rates have a positive relationship with term lengths, meaning the longer the length, the higher the rate. However, longer loan lifespans are appealing because the payment amounts are lower and thus more feasible for households with average incomes to manage. The downside is that overall, you’ll pay more for your home because you’ll have accrued more interest with a longer loan term.
Our agency boasts an extensive lender network, made up of both banks and private lenders. We use these working relationships to source the widest selection of products and term lengths possible. With us, you’ll find an option perfect for you.
How Are Interests Rates Established in Fixed Mortgages?
Banks and private agencies offer different lending rates. However, they are all established with the same benchmark reference: the Government of Canada’s bond yield. The bond yield works as a type of economic indicator, and lenders use it to determine their loan risk. Ultimately, the pattern is that when bond yields go up in Canada, lending rates will also go up across the board.
If you’d like more information on the relationship between bonds and mortgages, don’t hesitate to ask our mortgage consultants. We’d be happy to share our insider knowledge, so you can capitalize on the best time and deal with your loan.
What’s the Difference Between Fixed-Rate and Variable Rate Mortgages?
A fixed mortgage rate works in contrast to a variable mortgage rate. The rates in variable mortgages are not fixed in place like their counterparts. Instead, variable rates fluctuate periodically, according to market conditions.
Since variable rates are subject to go up or down, homebuyers can save money when rates drop. On the other hand, there is always the risk that rates go up, and applicants should be prepared financially to handle a price increase.
Is a Fixed-Rate Mortgage Right for Me?
Fixed mortgages are an ideal choice for applicants with a set or tight budgets because the stable nature of fixed mortgages makes it easy to budget each month. With a fixed rate, you have the peace of mind knowing precisely how much and how long it will take to pay off your loan in full.
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