How to Switch into a Competitive Fixed Rate
If you’re currently in a variable rate mortgage and you’re worried about rising interest rates, one idea would be to switch to a fixed rate.
While fixed rates are currently lower than variable rates, they may not stay that way forever.
By switching to a fixed rate, you’ll have the peace of mind of knowing exactly what your mortgage payments will be for the term of your mortgage.
You can also take advantage of the competitive fixed rates that are currently available in the market. Fixed rates are hovering around the 4.5%-5% range which sits around the historical average for mortgage rates. I sense that Canadians think we may be heading back down to 2% mortgage rates in the future.
Much (taxpayer) money was spent by the government of Canada to keep those mortgage interest rates low and it is unlikely that the government will be able to conduct this level of market manipulation again in the future now that Canada’s collective federal and provincial debts total over $2 Trillion.
Rates in this range allow people to purchase a owner occupied home yet require folks to be responsible with their finances due to the higher rate. It also impedes the types of mortgage fuelled asset price speculation we have seen in Canada’s real estate market over the past decade. As well, owing rental properties is still very possible as outlined in a recent Huber Mortgage blog (5 Steps to Ensure Your Rental Property Makes Money)
Rates within the historical average are likely a safe bet going forward.
Potentially Consolidate Debt with a Mortgage Refinance
If you’re looking to consolidate high-interest debt, such as credit card debt, a mortgage refinance with a historical range fixed rate may be a good option.
By refinancing your mortgage, you can take out some of the equity in your home to pay off your high-interest debt.
You can also potentially lower your monthly mortgage payments by switching to a lower fixed interest rate.
Conclusions and Further Thoughts
In conclusion, a variable rate mortgage can offer flexibility, but it also comes with some uncertainty.
If you’re worried about rising interest rates, or your current payment is too high for comfort, it may be a good idea to switch to a fixed rate.
You can potentially save money by switching to a fixed rate and at the same time consolidate high-interest debt to further increase your monthly savings.
A mortgage professional like Huber Mortgage is here to determine which option is right for you, create a mortgage strategy that will help you pay off your mortgage faster and save you thousands of unnecessary interest costs throughout the life of your mortgage.
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PS – One of my hobbies is blogging about mortgages, debt and government policy. During the day I’m a MORTGAGE BROKER in Kelowna, BC!
Check out the Huber Mortgage Home Buyers Guide HERE