What you should know about Canadian Mortgages
Interest rates in Canada are at an all time low right now making it difficult to decide on what kind of mortgage to take out. A fixed rate mortgage obviously offers security, which offers peace of mind especially if rates were to rise sharply, whereas a variable rate enables you the homeowner to instantaneously reap the rewards of any decrease in the interest rate. But whether rates are low or high the choice between a fixed rate and variable mortgage is one that should be considered very carefully.
Depending on where you are in the world mortgages vary and that is certainly the case in Canada and the United States of America with the main difference being how the interest, or compound interest is calculated. For example mortgages in the United States have the interest compounded monthly and differ from mortgages in Canada, where interest is compounded semi-annually. Basically this means that monthly mortgage payments on identical loans are higher in the United States than they are in Canada because the number of compounding periods per year is higher, with mortgages in Canada having just two compounding months, compared to those of the United States which have 12.
So what are the current rates of interest on mortgages in Canada? Mortgage interest payment continues to decline in Canada right now, mainly due to the strength of the Canadian Dollar. The prime rate is currently at 3.0%, and has stayed the same since November last year, and is expected to stay the same for the foreseeable future.
If you have a variable rate mortgage it means you will continue to enjoy extraordinarily low interest rates and brokers are recommending that homeowners increase their payments to take advantage of such low rates.
The best interest rates on the market at the moment are 2.64% for a 1 Year Fixed Rate Mortgage which is being offered by the Safebridge Financial Group, ranging up to 3.92% for a 5 Year Fixed Rate Mortgage, which is again offered by Safebridge.
The 1 Year Variable Rate is currently being offered as low as 2.60% by the True North Mortgage Company, but the 5 Year Variable Rate is even lower and is currently just 2.10% with the True North Mortgage Company again topping the charts with the best available rates.
If you are looking to buy your first home this rate is particularly eye-catching, and should you choose to take True North up on their current rate treat it like a fixed rate mortgage and adjust your payments accordingly.
You can use our free Canadian Mortgage Calculator to determine your monthly payments. Its easy, all you need is to fill 3 fields and click of a mouse.