Mortgage Rate Options

[arroy]

I am currently about to purchase my first home, personal residence, in Calgary. I am using the Quickstart techniques for "creatively buying my personal residence". I am having trouble whether to pick a variable rate or fixed rate mortgage and for how long a term. I am 23 yrs old and am very new to the game. What is the best option to choose? What should I consider?

Thanks for the help

- Ashley

 

[EricG]

QUOTE (arroy @ Jan 30 2008, 10:21 AM) I am currently about to purchase my first home, personal residence, in Calgary. I am using the Quickstart techniques for "creatively buying my personal residence". I am having trouble whether to pick a variable rate or fixed rate mortgage and for how long a term. I am 23 yrs old and am very new to the game. What is the best option to choose? What should I consider?

Thanks for the help

- Ashley

www.smithman.net
Go to this website > order the book (or purchase from bookstore) > read the book

 

[GregGillespie]

QUOTE (arroy @ Jan 30 2008, 07:21 AM) I am currently about to purchase my first home, personal residence, in Calgary. I am using the Quickstart techniques for "creatively buying my personal residence". I am having trouble whether to pick a variable rate or fixed rate mortgage and for how long a term. I am 23 yrs old and am very new to the game. What is the best option to choose? What should I consider?

Thanks for the help

- Ashley


Hi Ashley,

Congratulations on taking action! For the most part, you will save on interest over the long run by going with a variable rate mortgage but may lose the "piece of mind" that goes with knowing exactly what you are paying towards principal and interest each and every month. It comes down (partly) to your tolerance for the odd 1/4 point increase (although prime rate and hence VR mortgages just went down!). We have a combination of both FR and VR across our portfolio.

The mortgage experts on this forum will tell you (and I agree) to make sure that the product you choose (including rate, amoritization, LTV, etc) all fit into your future plans for what you want this and subsequent properties to do for you in the long run.

Good luck!

Greg

 

[PeterKinchMortgageTeam]

QUOTE (arroy @ Jan 30 2008, 09:21 AM) I am currently about to purchase my first home, personal residence, in Calgary. I am using the Quickstart techniques for "creatively buying my personal residence". I am having trouble whether to pick a variable rate or fixed rate mortgage and for how long a term. I am 23 yrs old and am very new to the game. What is the best option to choose? What should I consider?

Thanks for the help

- Ashley

Hi Ashley,

Like Greg pointed out, you would probably save more money over the longer term with a variable rate mortgage as with the discount, the rate is usually lower than availiable fixed rates. They do however, fluctuate with prime which means your rate and payment will change. If you`re not comfortable with that, you`re probably better off in a fixed rate. That being said, there are alot of really great options with varialbe rate mortgages such as front end loaders which allow you to take advantage of really steep discounts for a short time - many clients then lock in to a fixed rate. Best of both worlds! The risk is that you don`t know what the fixed rate will be when you do lock in. Talk to your bank or broker about interest rate predictions and then see how you feel.

As far as the amoritization, while it is a little more expensive (if you`re putting down less than 20%) - take the extended amoritization to 40 years. You can always make your payments based on a 20 or 25 yr am, but it gives you flexibility. If things get a little tight, you are only obligated to make the lower payment. (if you`re planning on building a rental portfolio, it will also help you to qualify.....)

Hope that helps,