With an RBC Royal Bank® variable rate mortgage, your payment amount stays fixed for the term; however, the interest rate will fluctuate with any changes in the RBC® prime interest rate1.
This means that your monthly mortgage payments will remain the same, but if our prime rate goes down, more of your payment will go toward your principal. And if our prime rate goes up, more of the payment will go toward the interest.
The variable rate advantage
Examining Canadian mortgage rate data from 1950 to 2007, Dr. Moshe Milevsky, Associate Professor of Finance at York University, found:
> Choosing a variable rate mortgage would have saved Canadians $20,000 in interest payments over 15 years (based on a $100,000 mortgage)
> Canadians would have been better off borrowing at a prime rate (variable) compared to a five-year fixed rate 89% of the time.
As you can see, a variable rate mortgage offers the possibility of greater long-term interest savings.
Read this complete article at the RBC Advice Centre.
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