What is Fixed Mortgage Interest Rates?

A fixed mortgage means that the interest on the note remains unchanged during the entire term of the loan. Whereas in a floating mortgage the interest may increase or decrease according to market and industry standards. There are pros and cons to each system and so one has to choose between the two after carefully weighing his needs and the pros and cons. In Canada the banks offer loans upto a maximum of ten years only under the fixed mortgage interest rates system due to various constraints. The major advantage of this type of mortgage interest is that it is steady and not prone to changes owing to market forces like inflation, etc. Whereas an adjustable mortgage interest rate means that rates can vary according to the market and so the home owner may end up paying more than he bargained for.

Short Term Mortgages

In Canada, the trend is to opt for short term mortgages, whether fixed or variable, and try to pay off the mortgage as early as possible. To encourage and facilitate people clearing their debts faster, the Canadian government offers prepayment of most home mortgages without any penalties with a few exceptions. Also an average Canadian has the option of increasing his monthly payments by 100% with no extra charges or penalties. Given the current economic slowdown globally, companies are eager for business and so are offering their customers the chance to buy a house with a down payment of just 5% of the total sale price.

There is some comfort in fixed mortgage interest rates that the rates will remain steady during the term of the loan. And in order to drum up business and beat the competition, banks are offering pre-approved loans which means even less paper work and effort in acquiring a home. The downside is that if and when the central bank in Canada, the Bank of Canada lowers its interest rates, other banks are obliged to follow and do the same. While this rate change will be reflected in a variable rate mortgage, with a fixed rate mortgage you will still be paying the higher rate.

And in this digital age, everything is available online and so all the initial studying and analyzing various options can be done from the comfort of your home or office. While deciding on your mortgage, bear in mind that after the global economic crisis that began with credit scarcity the Prime Plus has become the new bench mark for banks. It is the rate at which banks lend to their most creditworthy customers. If you can get a loan or mortgage close to the prime lending rate, then it is an unbelievably good product for savings and security. In Canada, mortgages are regulated at the provincial level and so there is no uniformity across the country. The Canada Mortgage and Housing Corporation estimates that almost 62.1% of the $593 billion mortgage market is outstanding as home owners struggle to meet their obligations.

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