so I currently have a variable open mortgage with a rate of 2.15% for 60 months  This works out to approx 895$ a month.

I can change to a fixed rate of 3.99% for 63 months if I act before the 28th of this month. This works out to approx 1090$ a month

With all this talk about mortgage rates going up, the wife and I are trying to decide weather to chance it with our variable rate or lock in at the 3.99%

this is our first mortgage so we are having a real hard time making a decision.

There are a few people here on there 2nd or 3rd mortgage I am sure and I am just wondering what everyone opinions are.

Some of us even went to school for "numbers" (Jester )

Thanks all

Heummmm the ultimate mortgage question!!!!  Boil it down to this: can you stomach the uncertainty?  Could you absorb an extra 2% on your mortgage rate let say all the way to 5 or 6%?  Variable can yield great savings but it is still a bit of gambling.  I am more of a locked mortgage myself simply because I like to sleep well.

Hope I did not make things worst for you!!!

Historically mortgage rates have averaged about 7-8% over the last 50 years.
They certainly aren't going down.
The debate is how fast they will rise, not so much if they will rise.

I suggest that if you were able to lock in a 5 year fixed rate at 3.99% you will have done very well for yourself over the long haul.

No correct answer here but it really comes down to your risk tolerence. if you like knowing what you will pay go for the fixed rate - yes you might pay more for your house in the long run but you just might sleep better at night. If you are better at tolerating risk go variable.

I tend to swing the opposite way ( no jokes please ).

You're going to have a mortgage for 20 years or so.  If you could only choose ONE method for the whole 20 years, variable would be the way to go since you always pay a premium for the "security" of knowing what you payments will be.  But obviously, you don't have to choose a single method.  But 5 years down the road, the only way you will have lost is if rates have risen for an extended period of time beyond 3.99 %.  And if that's the case, then 5 years from now you will be asking yourself the same question.  If rates are still high at the time your mortgage term ends, you would be smarter to take a variable mortgage and would likely continue to do so unless for some reason, rates were set to rise again, which would be increasingly unlikely.  

For me, I just ride the variable train all the way downtown.  Unless you lock-in at the right time, there is negligible savings and it could very well back-fire as you find yourself locked-in at year 3 as rates start sliding down again.

Don't waste your time with a mortgage broker either.  I used one twice and both times I lost money by locking in.  I finally went variable and have saved so much over the last 3 years that I can now afford a spike in rates and still come out ahead, or at least even.

I personally wouldn't sleep better knowing that I'm paying more than I have to, just for locking in.  Mind you, I don't let stuff like that affect my sleep anyway.  Why bother ?  

i am still trying to make all this out.  we had a sit down with a mortgage broker today.  we have looked at a few and expect to buy in the next couple months.  
   i am trying to follow it all.

I'd suggest going variable but putting the difference (in your case, approx $200) into a TFSA every month.  That way you build yourself a cushion in case the rates start to go up... and they will go up (they can't get much lower), but the chances of them skyrocketing to 8% in the next 5 years is pretty slim I'd imagine

Man, I'm glad we don't live in the 80's... 18% mortgage rates?  No thanks!

I just locked in at 3.9 % for 5 years fixed rate.

I was offered the variable at 2.9% but didn't see the value in it, as if it goes up (as it has been the past 2 weeks) it could end up going past 3.9% and with locking in, i know how much i have to pay every 2 weeks (i do it bi-weekly as you do a couple more payments a year)

I like knowing exactly how much i have to come up with every 2 weeks, so i don't have to worry, and have to try to come up with more cash if the rates change.

We locked in 5 years ago at 4.5% and our banker at the time said she thought it would never be that low and couldn't see it going lower, and here we are at 3.9% 5 years later.

So it boils down to if you are a gambler, or a safety guy.

Eric

I remember seeing some study that demonstrated that variable rate mortgages
were ALWAYS less expensive for any given period of 5 years.

Your premium difference here is almost 2 full percent. That's quite a bit.
(...about $12,000 over 5 yrs ... )

Then again, 3.99% is pretty good for a 5yr fixed term.

What you can do is take the variable rate mortgage, but pay the fix monthly rate. ($1090).
That way, you are making a payment of an extra $200/mo directly against your principal.
If rates rise, that $200 extra payment will become smaller until rates reach 3.99%
at which point it will be $0, but you likely still knocked off a good a few years of mortgage payments
in the process.

Unless rates climb above 3.99% within 1 yr , (which seems unlikely...),
the extra money you would save up front on a variable rate ,
would compensate if rates went above 3.99%

Another option would be to find a mortgage with a variable rate, but with a cap.

BMO offered this a few years back (...I don't know if it still exists ).
Basically, the variable rate isn't "quite" as good, but it's capped at a certain level.

I had one that was prime rate + 1%, with a cap at 6.5%
(...this was a few years ago when prime was about 3% )

I liked the idea of have the variable rate with the pseudo-security of a max rate.

Of course this a moot point for me now,
because I converted my RRSP into a self-directed mortgage,
so I basically own my mortgage (held in trust in my RRSP ),
and any interest I pay comes back to me.
This is a great idea, but you need to have enough equity in your RRSP
to cover the cost of your mortgage.

Good luck.

Cheers,
Steph

I'd bet my current house that 2 years before interest rates skyrocketed to 18% in the 80's NOBODY would have said "Hey, wanna know what's going to happen in 2 years to mortgage interest rates?"
Why do I say that?  Because I'm not sure where people are getting their confidence that interest rates won't jump to 7, 8 , 10% in a matter of a year... nobody here is named Mark Carney or has a magic crystal ball.  
I think it's poor advice to offer someone to say that you don't think interest rates are going to stay low.  I'm HOPING they don't jump, I'd like to THINK they won't jump... but show me anything but a bunch of pinball players here and ask yourself how any of us are going to be confident they won't - it's unwarranted confidence in a variable you and I have no influence over.
If you can afford to pay double your current interest rate safely, then I'd go variable.  If you are going to be homeless if that rate gets to 6%, I'd lock in - simple as that.  

Quoted from McMean

If you are going to be homeless if that rate gets to 6%, I'd lock in - simple as that.  

Yup... that's probably the wisest advice right there.....


Steph

I would second the advice of don't waste your time with a mortgage broker.    Pick a few banks and play them off against each other.    Little extras they may/might throw in like safety deposit boxes, no fee investment accounts are things you can ask for too.  

Fixed or variable its a personal preference.  I locked in for 7 years so I'm sure am paying a way more than others, but I haven't worried a minute in the last few years about any rate increase discussions....