Mortgage Rates

What to choose?

Do you go with a variable mortgage or a fixed-rate mortgage?  Do you go 3 year, 5 year, 10 year or go 1 year.

These are some of the most difficult questions when deciding how much money to borrow and at what rate to borrow.  Most posted rates are not the lowest a bank or a mortgage lender will go, make sure to try to negotiate a lower rate.  Shop around, ask many questions, find out what works best for you in your specific situation before making your final choice.

The average five year closed mortgage is 5.34 % right now, if you borrowed $200,000, with a 25 year amortization, your monthly payment would be roughly $1200 a month.  In 25 years your total payment would be $360,000 and $160,000 would be in interest.  The average rate for a five year closed variable mortgage is 2.85% with the same numbers as before.  Your monthly payments would be roughly $930 and your total payment would be $279,000 with $79,000 in interest.  However, if you used your five year closed monthly payments ($1200) on your variable mortgage you pay down your mortgage in 17 years and your interest over that time would only be about $52,000.

As that stands, variable would definitely sound like the better option for everyone.  However, interest rates change over the life of a mortgage.  What if the rates go up? What if they go up higher then the fixed rate you have locked in at?

If rates are changing and you are looking every day and can't handle the fluctuation, then variable may not be for you.  If you are more comfortbale knowing this is my payment for the next 5 years, then fixed rate closed may be for you.  If you are more comfortable taking a bit of a risk, letting the rates fluctuate and taking advantage of the variable rate being lower then fixed rates now, then variable mortgage is for you. 

Regardless of which way you go, the key to successful home ownership is:  PAY DOWN YOUR MORTGAGE AS FAST AS YOU CAN!!




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