Fixed Versus Variable Rates
Fixed and Variable rates are always a challenging decision for anyone make. I always advocate selecting a rate or term that suits your individual strategy for the subject property. Things to consider, when (if ever) might I sell? Would I purchase again? Can the mortgage be ported or transferred to another property? Is this a rental?
Ultimately, if looking at rates, variable options will almost always have lower effective rates, however they come with potential to increase or decrease with decisions made by the Bank of Canada and Chartered Banks as to the prime lending rate. Fixed rates gives you security and comfort that nothing will change during your term.
An option for consideration, is as follows, firstly, calculate the mortgage payment based on the best 5 year fixed rate available (assuming you are comfortable with this payment), you can then look at a variable rate, however apply the higher fixed payment against the lower variable effective rate, thus making more of each payment go towards principal reduction as opposed to interest coverage.
A link below to a recent Globe and Mail Article