Wednesday, March 21, 2007

Variable rate mortgage - Is it right for you?

Toronto Real Estate Board (TREB) Average Prices and Graph
Is a variable rate mortgage right for you?
(NC)-If you are not a market watcher, a variable rate mortgage may make you nervous. With this type of mortgage, the interest rate payable fluctuates with the prime lending rate. While a variable rate mortgage can save you money when you are financing your home purchase, you need to be comfortable with the associated risks.

As a general rule, variable rate mortgages ordinarily offer lower interest rates than fixed rate mortgages. In the long run, variable rate mortgages have proven to be a good bet to save money. More and more Canadians have been turning to variable rate mortgages to finance their home buying.

Some people may shy away from variable rate mortgages as their monthly payment amount may change. But with products like CIBC's Better Than Prime Mortgage, your monthly payment amount will be the same, even if the prime lending rate fluctuates. This will help you budget effectively and take advantage of lower rates.

There are three basic types of variable rate mortgages available on the market today:

1. Interest rate changes with prime or stays just below prime- these types of mortgages can be either closed or open. If there is a discount on the prime rate, the mortgage is usually closed.

2. Interest rate is discounted and has a special introductory offer- this type of variable rate mortgage carries an introductory rate that is discounted from the prime lending rate for a specified length of time. After the introductory period, a smaller discount may apply for the remainder of the term.

3. Interest rate fluctuates and is capped- this type of mortgage offers the security of a cap on the interest rate, which means that your interest rate will never rise above a certain level, often the 5-year fixed rate. The interest rate is usually higher than the prime lending rate, but this type of mortgage offers protection against rising interest rates. These mortgages are usually closed.

For more information about whether a variable rate mortgage is right for you, contact your local CIBC branch or call 1 800 465-CIBC (2422). You can also visit the CIBC website at Credit:

More information on Mortgages and Rates

For more information please contact A. Mark Argentino

A. Mark Argentino, Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc., Brokerage
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1

BUS. 905-828-3434
FAX. 905-828-2829

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