Consistently I am asked what is better, fixed or variable? Historically speaking the VRM (variable rate mortgage) is a better way to go but it certainly has it’s share of risks. There are a few lenders now offering the best of both worlds. The Frozen Variable Payment is a wonderful solution for those of you looking to ride the variable wave but embrace the security of a fixed payment. Here is an example of how it works: the current variable is Prime minus 0.30% which works out to 1.95%. Your payments are frozen at 3.65% (roughly). The difference in interest is 1.70% so that means that the additional payment deduction of 1.70% now comes directly off your principle which is AWESOME. In the event (when) inflation kicks in and interest rates raise, the closer you get to 3.65%, the closer you get to a normal variable payment. If the interest rate exceeds 3.65%, you are protected with a frozen payment but are now paying less of the principle which obviously isn’t a good thing. Now you ask yourself, what happens if the interest rate sky rockets above 10%? Once you eat into your principle payment past to point of their being anything left, it will start to increase your amortization. The lender will contact you before this happens and suggest that you increase the size of your payment to compensate. I also suggest clients to pay attention to my newsletter and be cognizant of rates. If you see them creep over 3.65% (in this circumstance), then increase your payments unless your budget can’t handle it.

I am always listening for your opinion so please feel free to comment below and check out my other blogs on this site. I am a Vancouver mortgage broker working with everyone from first home buyers to investors. At the same time I do my best to education the public on how to be more financially savvy over all. If you would like to learn more about mortgages and over all real estate, please check out www.jessijohnson.ca. To subscribe to my vblogs, please click here: www.firsthomeinfo.ca/blog