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Not all variable rate mortgage are the same.  Many think that when prime rate goes up, their mortgage payment will increase too.  However, this is not always the case.  There are differences between a variable rate mortgage and adjustable rate mortgages.  Not all mortgage institutions make a point of detailing which one they offer.  Its important to be informed.

Adjustable rate mortgages are similiar to variable rate mortgages with one significant distinction.  If you have an adjustable rate mortgage the payment will change when prime rate goes up or down.  When you have a variable rate mortgage, the payment does not change however, the amount of principal that you pay down is adjusted to accommodate the increase in interest payments.  Therefore, you pay less principal and more interest.  This could stretch the amount of time it takes to pay off the mortgage.


It is important to know which one you are signing up for when finalizing your mortgage documentation.

Which one is right for you?

If your finances are such that you cannot afford increased mortgage payments, you may consider a variable rate mortgage.  This way, you will enjoy the knowledge that your mortgage payment doesn’t change.  The down side is that you will pay less principal each payment causing the period to pay off the mortgage to increase.

If you can take on the payment increase, an adjustable rate mortgage is for you.  Your payment goes up and you will proceed on course with your chosen amortization period.

Variable and adjustable rate mortgage usually can be locked into a fixed mortgage rate at any time during the term, however, they will lock in at the current fixed rate.  

Contact me to discuss your options.

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