LOCKING IN YOUR VARIABLE RATE TO A FIXED RATE
You can flip to a fixed rate.
Amar and Sarah (not their real names) had a meeting today with our team, and Sarah asked a very good question that we’d like to share with you.
Do we lock in at the current variable rate?
Here’s the situation.
We’ve worked with Amar and Sarah and obtained an approval for a variable rate mortgage for their newly built home, with possession date at the end of November.
While reviewing and signing the mortgage commitment, a discussion around interest rates was initiated. Bob demonstrated the difference in payment amounts and amortization between the current fixed and variable rates available (see chart below).
Through the process Bob indicated that if they heard rumblings about interest rates changing then they could lock in at anytime from the variable rate to a fixed rate which prompted Sarah’s question, “do we lock in at the current variable rate?”
The answer is no, you would lock in at the best fixed posted rate at the time but you want to be careful because if your mortgage has been secured with a chartered bank, their posted rates can be a lot higher than the best discounted rate. It is very important to have the right lender from the start.
Amar and Sarah were relieved that the flexibility of locking in to a fixed rate at any time was available, and they are very excited about the upcoming possession of their new home – and we’re excited for them!
If you find yourself in a position where you are considering moving from a variable to a fixed rate, reach out to us first. We’ll have a look at your individual situation and provide direction and options for moving forward.