Variable or Fixed?

Are variable rate mortgages still a good bet?  Mark Olkowski from Invis suggests so, but calls them an “educated gamble” at this point.  Source:  Financial Post

  1. Are there different financing allowances for new-home buyers as opposed to resale? The article you linked to contained the following:
    “New-home buyers not closing a deal for 60 or 90 days can usually get mortgage brokers to guarantee today’s rate at a fixed term with the option of reverting to a floating rate at the time of purchase.”
    If someone was building a new home and expected possession at the end of the year (e.g. 6-8 months), can they lock in a rate now? Would be especially relevant with rates looking as though they might head upwards…
    Thanks – love the blog.

  2. Hi Al,
    If you own the land and are getting an insured mortgage the rate can generally be held for 9 months. If you are purchasing from a builder and don’t already own the land then a 120-day rate hold typically applies. Feel free to give me a call for specifics.
    Hope this helps,
    Melanie

  3. Is it true that most fixed rate mortgages have compound interest, where variable mortgages are calculated semi annually not in advance. And if so does that not make variable mortgages the easy choice in most if not all cases?

  4. Not sure that made sense. What I meant to ask is: If fixed mortgages have interest calculated monthly and variable mortgages have interest calculated twice a year….is that not comparing simple interest to compound interest? And does that not make it a huge cost to take on a fixed mortgage?

  5. fixed mortgages have interest calculated monthly and variable mortgages have interest calculated twice a year….is that not comparing simple interest to compound interest? And does that not make it a huge cost to take on a fixed mortgage?

  6. Not true.
    If you are talking about compounding then fixed mortgages compound semi-annually (twice a year).
    Variable mortgages are either semi-annual or monthly compounded.

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