So… You want to get a Variable Rate Mortgage.
Be careful, some of the offers out there right now will end up costing you a lot more than you think.
Rates on Variable Rate Mortgages are currently ranging from 2.4% (0.60% below Prime) to 2.7% (0.30% below Prime). The difference between the lowest rate available and a slightly higher rate can mean all the difference in the world. When we hear that certain Lenders are offering really low Variable Rate Mortgages we get a little worried. Lenders will occasionally offer a discount to their peers on Variable Rate Mortgages in order to draw Borrowers in. When those same Borrowers are looking to lock into a Fixed Rate Mortgage down the road, look out! They get stuck with a Fixed Rate that is much higher than the Fixed Rates being offered to new clients by the same institution. The Lender calls this an “Existing Client Rate”; others might call this putting lipstick on a pig. Saving 0.10% for 2 or 3 years only to get hit with a rate that is 1% or 1.5% higher when you try to lock in your mortgage doesn’t exactly develop great relationships between a Bank and its customers, but it does develop higher profits.
Mortgage rates can change as quickly as opinion polls on a city’s Mayor. The most important feature of a Variable Rate Mortgage is your ability to lock into a fairly priced Fixed Rate when it looks like rates are increasing.
When you’re shopping for a Variable Rate Mortgage, work with a Non-Balance Sheet Lender. Your Bank is not one such Lender. Keep in mind that in most cases your Bank will look to make a little extra money on your mortgage rate. That’s how they make money.
There are plenty of great rates available right now in the market, on both Fixed Rate and Variable Rate Mortgages. The key to lowering your borrowing costs remains planning ahead and knowing your goals. You can rely on the Sound, Unbiased Mortgage Advice of MorCan Direct.