Question:

Hello; I know this is always the question but in your opinion, would you go with a fixed rate of 4.65% over 5yrs or go with a prime - 0.75% variable rate?? My closing date is October 1st on a 200,000$ mortgage and I just cant decide what to do. I hear rates will go up by 1.5-2.0 points in the next year but you never know. What would you do if you were me? Either way I plan on charging myself biweekly payments at roughly 6% Thanks

Answer:

The only way you can tell which is the right way to go is to look back five years from now. 4.65% is a very good five year rate today and prime less .75% is the best you can expect on a variable today. Bank prime will have to increase by 1.75% before it starts to cost you money on the variable rate. It is possible for prime to rise that much and more in a twelve month period and in the past it has. The upside with variable rates is that you can usually lock in to fixed rate mortgages at any time during the term, usually at discounted rates. The downside is that it is usually a rate hike that triggers your thoughts to do so and by that time the rate has already gone up. If you feel lucky and want to gamble take the variable rate. If not, take comfort in the fact that in the last twenty five years, first mortgage rates have ranged from a 21.5% high to a low of 4.25% and at 4.65% you aren't very far from the lowest rate. I personally, am not a gambler and would take the 4.65% rate.I would rather not have to constantly follow interest rates and worry about bank prime going up every month. John Lozinski

Answered By: John Lozinski

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