As one of the most popular options for Canadian mortgages, the fixed-rate mortgage is one that you are likely to consider seriously when you want to purchase a home. We are the best place to access information on Canadian fixed mortgage rates, as we strive not only to help you compare current fixed mortgage rates, but we also provide detailed information on fixed-rate mortgages in Canada. Our tools allow you to search and find the most competitive rates in your province, and we help you to decide whether a fixed-rate mortgage is right for you or if it is better to take advantage of another financing option for your Canadian property. Using our extensive contacts, we help you compare the best fixed mortgage rates from banks, brokers and other lenders. Read on to find out more about fixed mortgages and then choose the best rate for you!
What is a Fixed Mortgage Rate?
Simply put, a fixed mortgage rate is one that does not change over the course of a home loan. Unlike variable mortgage rates, fixed rates will not increase or decrease during the lifetime of your loan. The interest rate is based on Government of Canada bond yields plus any additional expenses that the lender incurs in order to loan the money for the home purchase.
Canadians may obtain a fixed-rate mortgage for terms of 10 years or less. This is much shorter than in the United States, where mortgage terms of 15 or 30 years are the most common fixed-rate mortgage options. The advantage to Canadians, of course, is that they end up paying off their homes more quickly than most Americans do.
There are two main loan options when it comes to fixed mortgage rates. Canada allows its citizens to choose between an open mortgage and a closed mortgage. A closed mortgage is one that cannot be paid off early without incurring an extra penalty. Open mortgages allow borrowers to pay off the mortgage at any time without penalty, even if the loan is satisfied years before the end of the original amortization period. Interest rates tend to be much higher on open mortgages than on closed mortgages because there is a strong possibility that borrowers will pay off their loans early and deprive the lender of interest income.
Pros and Cons of a Fixed-Rate Mortgage
As with all financial products, there are several pros and cons to fixed-rate mortgages in Canada. As far as the pros, borrowers get a stable payment that will never change over the life of their loan. This is unlike variable-rate mortgages in which the rate may change several time over the course of the loan. With the rate change in a variable-rate mortgage comes a change in the amount of the monthly minimum payment that is required. The second pro of a fixed-rate mortgage in Canada flows from the first. Since the mortgage rate and payment amount are stable over the lives of loans with fixed mortgage rates, it is much easier for homeowners to budget their money and make future plans for investing, saving and much more. If you like consistency and stability, a fixed-rate mortgage is probably the right choice for you.
On the other hand, a fixed-rate mortgage is not the best choice for all Canadian homeowners. One significant con of the fixed-rate mortgage is that its interest rate tends to be much higher than the mortgage rates available on variable-rate mortgage loans. You can often get a variable-rate mortgage with an interest rate that is a few percentage points lower than the rate available on a fixed-rate mortgage. Of course, this rate may change. However, the rate changes are not always significant, and some people can end up with a mortgage that has a rate that never increases to the point where it reaches the higher fixed rate that was available when they signed for the loan. In other words, the payment may change, but you still pay less interest than you would on a fixed-rate loan. Even if your interest rate on a variable rate loan rises above the average fixed rate, you can refinance your home and take advantage of lower fixed mortgage rates should the need ever arise.
Another con related to fixed-rate mortgages is that with a variable-rate mortgage, your interest rate might actually go down over the course of your loan. It may be even cheaper to pay the mortgage in the future with a variable-rate loan than it is when you first sign for the funds. This never happens when you choose a fixed-rate mortgage.
Who Benefits from a Fixed Mortgage Rate?
Those who have a set limit as to the total mortgage payment that they can afford will benefit the most from Canadian fixed mortgage rates. All you have to do is determine the maximum amount you can pay for a mortgage, and get a fixed-rate mortgage that sets the payment at or below what you can afford. This payment will never change, so there is never any worry as to whether you will be able to pay the loan in the future. Again, if you like stability, the fixed-rate mortgage is right for you.
Interesting Facts about Fixed Mortgage Rates in Canada
Current fixed mortgage rates are encouraging many people to buy homes in Canada, but there are some trends that suggest people are preferring shorter loan terms. For example, about 40 percent of all Canadian homeowners in 2012 held a loan with a 5-year term. Today, only about a third of all homeowners would consider a loan of up to 10 years. This is a change from past decades in which the 10-year loan was the most popular fixed-rate mortgage option. Clearly, many people believe that they can get the best fixed mortgage rates on loans that have terms of 10 years or less.
Your Fixed Mortgage Rate Source
There are many things to consider when buying a home in Canada, not the least of which is the loan term and type that you will need to pay for your home. The fixed-rate mortgage may indeed be the best choice for you, but there are many other mortgage options. We want to help you make the right mortgage choice, so choose the best rate on this page or fill out the online mortgage application form for more information on Canadian mortgage rates and all of the possibilities for home loan financing in Canada.
