Variable rate Mortgages
This is a mortgage in which the interest rate is periodically adjusted to reflect market conditions. A best variable mortgage rate appeals to various consumers due to it being calculated on the prime rate, which is generally below that of the fixed rate. Usually, payments are fixed over three or five years. As interest rates decrease, larger is the sum from the mortgage payment dedicated to the principal amount. Therefore, your amortization period, the number of years over which you have elected to repay the mortgage, principal, and interest could fluctuate, depending on interest rate movement.
When making a decision between the types of mortgage that is most suited for your needs, there are generally influences that will affect the decision-making process. They are usually, primarily income, lifestyle, and degree of risk tolerance. A particular appeal of variable rate mortgages (VRM) is that the best variable mortgage rate is usually below that of the fixed rate mortgages. However, for some buyers, the primary obstacle can be the risk factor and the fact that interest rates may increase without prior warning.
Is “Variable” right for you?
For the moment, not taking into consideration the advantages of a best variable mortgage rate; there is an easy way to determine if a variable rate mortgage will meet your particular preferences. That is, to decide if you could afford an increased interest rate should they go in that direction. Accordingly, one of the first actions to take would be to contact your mortgage broker and assess your current income, earnings and the potential for any increases.
One discussion you can have with your mortgage broker is mitigating the risk factor and being rewarded for choosing the best variable mortgage rate option available. It relates to fixing your mortgage payment at a determined amount that is higher than the minimum stipulated.
Variable and flexible
For many home buyers and investors, although the rate factor is important, the advantage of flexibility and features could be decision influencers in the selection of a mortgage product. The benefits of being able to deposit lump-sum payments towards your principal amount, also known as prepayment privileges are a particular incentive.
The amount permitted differs between banks and lenders, but it’s usually in the range of 15% to 20% of the total sum owed. Lump-sum payments are generally annualized. For further clarification on this aspect, consult your qualified mortgage broker!