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jose36
Joined: 05 Dec 2007
Posts: 1
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| Posted: Wed Dec 05, 2007 9:22 am Post subject: Variables or Fixed Rate Mortgage? |
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Hi,
I am planning to buy a house of my own and have not been able to decide as to whether to go in for Fixed rate or Variable rate Mortgage. Though I have gone through many articles on this but I would still like to learn more as this would be a one time decision. Can someone please suggest a site which can elaborate more on this issue? Thanks! |
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chow
Joined: 22 Jan 2005
Posts: 2350
Location: Cornfield County, Indiana
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| Posted: Wed Dec 05, 2007 10:27 am Post subject: |
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| Why would you get a variable rate when fixed is going to be better in the long run? |
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Haplo
Joined: 20 Jan 2005
Posts: 2422
Location: Springfield, IL
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| Posted: Mon Jan 21, 2008 7:12 pm Post subject: |
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| Most variable rates are worse pricing than fixed rates right now. |
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intelmujib
Joined: 07 Nov 2009
Posts: 2
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| Posted: Sat Nov 07, 2009 9:36 am Post subject: |
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Variable rate is based on the Bank Prime, which is what financial institutions charge to the consumers. Bank Prime is based on the Central Bank Rate (the amount of interest the Bank of Canada charges financial institutions for short term loans). As the Central Bank Rate increases or decreases, so does Bank Prime and in turn the variable rate.
The 5 year fixed rate is based on the bond market. As the bond market increases or decreases so does the 5 year fixed rate.
If Bank Prime increases, that doesn’t mean that the fixed rate will increase or vice versa. Since January 2000 the average weekly Prime rate has been 5.09%. Conversely the average weekly 5 year fixed rate has been 6.89% during the same time period.
Just a few years ago, it was clear that going with a variable rate mortgage would save consumers money. But heavy discounts on fixed rate mortgages and the narrowing spread between short-term and long-term interest rates have made the choice today less obvious.
Instead of trying to guess where rates are headed, consumers would do better to think about their own situation. They should evaluate their personal balance sheets and risk tolerance. The decision of whether to go short (variable) or long (fixed) will depend on the consumers’ tolerance for risk as well as their ability to withstand increases in mortgage payments. |
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zofarerma
Joined: 30 Jan 2010
Posts: 7
Location: United States
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| Posted: Sun Mar 21, 2010 6:10 am Post subject: Variables or Fixed Rate Mortgage |
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Its more of a maths question than an Excel question.
Does mortgage interest work like savings accounts? ie: daily rate is annual rate / 365 and compounding only applies monthly? |
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joe1
Joined: 11 Nov 2008
Posts: 20
Location: California
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| Posted: Wed Apr 28, 2010 7:34 pm Post subject: |
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| If you believe you will live in the property for at least 10 years, go with a fixed rate program. If you think you will only live there for a few years, look into the corresponding years adjustable rate mortgage. |
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Warthen
Joined: 21 Dec 2010
Posts: 2
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| Posted: Wed Dec 22, 2010 9:58 am Post subject: |
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| Just keep in mind is that variable rate mortgages allow consumers to lock in to a fixed rate at any time without costs |
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