What is your variable rate mortgage at?
What is your variable rate mortgage at?
By now most all banks have confirmed that they have lowered their Prime lending rate by 0.50% to 2.50%, down from 3.00%, to match yesterdays 0.50% reduction by the Bank of Canada for their target for the overnight lending rate.
Good news to all those on variable rate mortgages I am sure.
Variable rate mortgages at least in one respect can come in two varieties, fixed payment or variable payment. What this means is that if you have a variable rate mortgage at an institution, they may allow or force you into one of the above payment scenarios. What these payment scenarios are is that for the fixed payment scenario although you are on a variable rate mortgage they want to fix your payment amount every month for example. They typically choose to fix your payment as if your mortgage was done at a 3 year fixed rate to determine the payment amount. As such when the 3 year fixed rate is above the variable rate you are paying off more of the principal with every payment and thus paying down your mortgage faster. The opposite is true if your fixed rate gets below the variable rate.
Alternatively, if your payment is set up to vary as or if the bank prime rate changes your payment will be adjusted to whatever it is based on the rate and your balance at the time. So here you can have payment relief if prime goes down and have payment “shock” (just an industry term, no cause for alarm 
) if prime goes up. One downside here if you will is that the former payment set up tricks/forces you to pay down your mortgage faster when your variable rate is less than the fixed rate, which is the situation we are in now and have been for some time. Of course there can be a number of upsides to the variable payment scenario as well.
Regardless of whichever payment schedule you are on there are likely a number of ways to save on interest and pay down your mortgage sooner and faster. Please feel free to contact me at any time for more information and assistance with paying off your mortgage sooner.
(604) 603-2520 / Maury@MauryLum.com / www.MauryLum.com /
