FIXED Rate Mortgage or VARIABLE rate mortgage??
What is the right choice for your client?
It can be confusing especially in an environment where fixed rates are still at a record all time low and Prime Rates are on the rise. The media creates a frenzy with every movement in Prime, we know it's going to increase, and we know the Government has to be cautious as our economy recovers. Even with the .75% increase in prime this year the variable rate mortgage is still a great choice and option for your client to front end load their savings with low interest rates.
Does Your Client….
- Want to save money on Interest and pay off their mortgage faster?
- Want to pay less each month and enjoy Lifestyle Choices?
- Have the room in their budget to handle fluctuations?
Lets compare a $250,000 Mortgage on a 25 year amortization:
- On a 5 Year Fixed Rate Mortgage at 3.69 for 5 years
- On a 5 year Variable Rate Mortgage at Prime -.70 and we'll assume a .50% increase in Prime per year
|
5 Year Fixed
|
Rate
|
Monthly Payment
|
Interest Paid
|
Balance
|
|
Year one
|
3.69
|
1,273.38
|
9,051.02
|
243,770.46
|
|
Year two
|
3.69
|
1,273.38
|
8,819.01
|
237,308.91
|
|
Year three
|
3.69
|
1,273.38
|
8,578.39
|
230,606.74
|
|
Year four
|
3.69
|
1,273.38
|
8,328.79
|
223,654.97
|
|
Year five
|
3.69
|
1,273.38
|
8,069.91
|
216,444.32
|
|
|
Total Paid
|
76,402.80
|
42,847.12
|
|
|
5 Year
Prime -70
|
Rate (with .50% prime increase/yr)
|
Monthly Payment
|
Interest Paid
|
Balance
|
|
Year one
|
2.30
|
1,095.17
|
5,644.32
|
242,502.28
|
|
Year two
|
2.80
|
1,155.34
|
6,659.33
|
235,297.53
|
|
Year three
|
3.30
|
1,214.96
|
7,607.85
|
228,325.86
|
|
Year four
|
3.80
|
1,273.87
|
8,481.88
|
221,531.30
|
|
Year five
|
4.30
|
1,331.87
|
9,312.31
|
214,861.17
|
|
|
Total Paid
|
72,854.52
|
37,705.69
|
|
With the Variable Mortgage you will:
~Pay $3,548.28 LESS in Monthly Payments over 5 years
~Pay $5,141.43 LESS in Interest
~Balance will be $1,583.15 LESS with the variable mortgage
Total savings across all three factors $10,272.86
Compliments of Street Capital
Posted by Carol Ireland
on October 1, 2010