by Jennifer - Branch Manager
When it comes to mortgage interest rates, it's not always easy to know what to do. Rates are currently at, or near, historic lows - so what does that mean? Do you choose a fixed rate mortgage or variable rate mortgage? To figure it out, it's good to understand the benefits of both.
With a fixed rate, your interest rate will not increase during the term you have selected. But remember, you won't be able to take advantage of any decline in rates that may occur until the end of your fixed rate term.
A variable rate mortgage fluctuates with the prime rate. The advantage of a variable rate is that it is usually one of the lowest mortgage rates offered - meaning you may save money now and if the Prime Rate falls. Keep in mind though that, if prime rate rises then your interest rate will also rise -which could increase your interest costs over the life of your mortgage and lengthen the amortization of your mortgage.
Some good news - in most circumstances you can lock your variable rate mortgage into a fixed rate mortgage at any time within your mortgage term.
Still can't decide? Fixed? Variable?
A third option is the RBC Homeline Plan® - a home equity product which allows you to choose both fixed and variable rates. Similar to diversifying your investment portfolio, you can benefit in any interest rate environment. When interest rates are on the rise, the fixed rate portion of your plan will provide savings and stability. When interest rates are decreasing, the variable interest rate portion of your mortgage will decrease, saving you interest. And the percentage that you split between fixed and variable is up to you.
Talk with one of our mortgage specialists today to discuss the benefits of fixed, variable or how the RBC Homeline Plan can help you benefit in any interest rate environment.
Find out more at the RBC Advice Centre.
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