A fixed-rate mortgage offers stability, which just does the trick for most homeowners in the GTA. However, a variable mortgage provides lower costs upfront, which can save you more money that can be used for other expenses. However, the decision is mostly not about numbers, but what works for your financial future.

Homebuyers often struggle with uncertainty. Will interest rates rise or fall? Is it better to lock in security or take a chance on savings?

In this guide, we will provide in-depth context so you can understand the pros and cons of each option and how to overcome the “what if” test.

How to Decide on a Fixed-Rate Mortgage: The “What If” Test

A fixed-rate mortgage offers certainty, as you will know exactly what your monthly payment will be for the entire loan term. This is ideal if you prefer consistency in your finances.

A variable mortgage requires flexibility. If the interest rates drop, your payments could decrease. In a case where rates increase, you will need to be prepared for higher costs.

Ask yourself the following key questions before deciding:

  • What if the mortgage rates in Ontario rise by a few percentage points?
  • Can you handle an increase in your monthly payment?
  • What if you plan to sell in five years?
  • Would a long-term rate commitment still make sense?

A well-planned approach and clear answers will ensure you choose the right option based on your financial goal.

The Hidden Costs of Choosing the Wrong Mortgage

Fixed mortgage rates can be more expensive at the beginning. Higher upfront costs mean you might pay more over the first few years; however, the benefit is long-term stability.

A variable mortgage can come with unexpected risks. If variable mortgage rates increase suddenly, you may struggle with higher monthly payments. Lenders don’t always explain these potential financial burdens upfront.

Switching from one mortgage to another may lead to penalties. Breaking a fixed-rate mortgage often results in high fees. Refinancing a variable mortgage might also involve unexpected costs.

A careful review of the terms is always essential, as it could save you thousands of dollars over time.

Frequently Asked Questions

  • Can I switch from a fixed-rate mortgage to a variable option later?
    Yes, but it may involve penalties. A fixed-rate mortgage often has high fees for early termination.
  • How do I know if now is the right time to lock in mortgage rates?
    A mortgage broker can analyze current trends. If mortgage rates in Toronto are expected to rise, then locking in fixed mortgage rates might be a smart move.

Working With a Mortgage Broker Can Save You More Money

A fixed-rate mortgage may not always be the best deal. While it provides stability, comparing different lenders to find the most competitive terms is important.

A mortgage broker gives you access to multiple lending options, which are so different and present more opportunities than banks offering a single product.

A variable mortgage can be very risky without the right strategy—a lender wouldn’t disclose this. However, a mortgage broker will effectively help you determine whether the potential savings outweigh the risks through calculative analysis and guidance.

At Northwood Mortgage, we connect you with lenders offering low mortgage rates. With access to a wide range of competitive mortgage rates in Ontario, you are guaranteed to get the best terms that are unique to your situation.

If you are ready to find the best mortgage rate, call Northwood Mortgage at 888-495-4825 or contact us online to secure your dream home at affordable interest rates.