Difference between Fixed Rate and Variable
There are several differences between a fixed and variable rate mortgage in Lethbridge, Alberta.
FIXED-RATE MORTGAGE: This term means your mortgage payments and rate stay the same for the duration of the term. Terms range from 1 year and up to 10 years.
VARIABLE RATE MORTGAGE: This term means that your mortgage rate may change if the variable rate changes during the term. The variable rate is tied to the Lenders prime rate and changes (up or down) when the Bank of Canada make changes to their prime rate.
The Bank of Canada increases or decreases its prime rate based on numerous economic variables and there is no set schedule for changes in these rates.
For example, a young couple buying their first home who have a tight budget may benefit from a fixed-rate mortgage because they may want to know what their regular payments are going to be. This supports their current budget. If this couple chose a variable rate mortgage, they may face undue financial hardship if their payment went up and they could not budget accordingly.