Deepinder Sidhu
Purchasing a property or taking out a new loan in Surrey, BC brings with it a major choice — the one between a mortgage with a fixed rate and a mortgage with a variable rate. The situation where the rates are fluctuating and the housing market is very competitive makes it essential for one to know both options quite well, as this way the person may correctly decide.
Let’s take a closer look at the functioning of each type of mortgage and then identify which one is the most appropriate for your current situation in the market.
Understanding the Basics
Fixed-Rate Mortgage
A fixed mortgage maintains the same interest rate and monthly payment for the whole term, which is usually 3 to 5 years. This option is popular among homeowners who prefer stability and predictability.
Variable-Rate Mortgage
A variable mortgage is connected to the lender’s prime rate, implying your interest rate might fluctuate throughout the term depending on the market conditions.
Fixed-Rate Mortgage: Stability & Peace of Mind
Key Benefits
Predictable monthly payments, which simplify budgeting
Future high rates are not affecting the mortgage holder
Great choice for buyers who want to know their expenses for sure
Economic changes do not cause any surprises
Things to Consider
Fixed rates are usually a little bit more than variable rates at the beginning
Penalties for breaking an early mortgage can be more
If rates go down, your rate is still locked unless you refinance
Best for: Homebuyers who are planning to stay long-term and those who number stability among their priorities in the expensive Surrey market.
Variable-Rate Mortgage: Flexibility & Potential Savings
Key Benefits
The most common practice is to give the customer a lower initial rate of interest.
In case of a decrease in the market rate, you will save at least part of the total cost.
Penalties for breaking or refinancing will be smaller compared to fixed-rate mortgages.
Homeowners moving in for short-term will find the mortgage more accommodating.
Things to Consider
If there is an increase in interest rates, then your monthly payments will also likely go up.
The customer needs to be able to manage the situation with the market changes.
Extra-planning may be required for budgeting purposes.
Best for: Buyers who are willing to take some risk and homeowners who will sell, upgrade, or refinance soon.
How Surrey’s Current Market Might Affect Your Decision?
The higher cost of houses leads to the situation where the difference in interest rates can determine the total price to a significant extent.
The recent variations in the interest rate have made the fixed and variable options almost equivalent in terms of cost.
A lot of homeowners in Surrey are opting for shorter fixed terms or hybrid mortgages.
The trend of split mortgages (combining fixed and variable) is gaining more popularity.
Which Mortgage Option Fits You Best?
Select a Fixed Mortgage if:
You seek payment predictability
You are looking for a long-term residence
You like the idea of financial security
Select a Variable Mortgage if:
Interest rates do not bother you
You are looking for flexibility and possible savings
You might sell or refinance in a couple of years
Think about a Hybrid Mortgage if:
You need a mix of stability and flexibility.
Final Thoughts
Pertaining to the matter of fixed vs variable mortgages in Surrey, there is no clear winner at all. Your own financial goals, risk appetite, and future plans are the right factors in making the decision. A lot of homeowners in today’s market are devising mortgage solutions that give them the best of both worlds.
For personalized advice, comparing options with a mortgage professional can help you choose a strategy that works best for your situation.