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Fixed or Variable Mortgage 馃憠馃徎Find Out Which Option is Best | Variable Rate Mortgage vs Fixed Rate - YouTube
Channel: The Village Guru
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This is Jeff O'Leary - 'The Village Guru'
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Mississauga Real Estate Broker
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and in today's episode I'm going to compare
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fixed-rate mortgages versus variable rate mortgages.
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We're going to go through the pros and cons
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and see which one is right for you.
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This video is great for homebuyers
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you're not gonna want to miss this
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let's get started!
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When you're buying a home there's a
lot of things to consider.
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Not even with the home search process
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but actually how do you get a mortgage,
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how do you qualify
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there's just a million questions
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so today I thought I would focus on one little aspect
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which is - what type of mortgage you're
going to get.
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The first mortgage I want to talk about is
fixed-rate mortgages.
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A fixed-rate mortgage is where the interest rate remains the same
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throughout the term of the mortgage.
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Fixed rate mortgages are super predictable
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and that's what's so good about them.
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You never have to worry about mortgage rates going up during the term of your mortgage
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you know that payment is going to be the same month after month
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they're a great option if you're a younger buyer
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or you're borrowing a lot of money
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and you want to make sure you have enough month a month
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and you can't afford a rise in interest rates.
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Finally, they're really good if you expect interest rates to go up in the near future.
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Now let's talk about the downside of fixed-rate mortgages.
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Well first off the interest rates are higher than a variable rate mortgage.
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You're gonna pay a premium to the bank
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for locking in your rate, that's just the
way it goes.
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Second, if interest rates go down during
the term of your mortgage
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you're going to be the loser because variable people are
gonna have less interest (to pay)
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while you're paying the same interest.
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So it's really a balancing act between security
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and playing the market
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and going with what the market rates are out there.
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So let's talk about variable rate mortgages.
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A variable rate mortgage is where the interest rate
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fluctuates with the market during the term of your mortgage.
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So when it comes to variable rates
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there are a couple of different products
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so it's important you understand this
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before you start shopping for a mortgage.
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The first one is a variable rate
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where your payment remains the same throughout the course of your mortgage.
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If you start off at one interest rate
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and then interest rates rise
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your payment remains the same
but what ends up happening is
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you're paying less and less towards the
principal of your mortgage
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and more interest.
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The second popular way a variable mortgage works
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is on an adjustable basis.
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That means as interest rates go up
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your monthly payment goes up also
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and the same can be said the other way
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if interest rates go down, your monthly
payment goes down.
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This is where it's important
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where you need to look at different lenders
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because all lenders have different criteria
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and it's important that you review this with your mortgage person
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and really understand the type of product that you're getting.
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Now let's go over the pros of a
variable mortgage.
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Well number one, a lot of people have saved
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thousands of dollars over the last 10-15 years
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by going variable because the rates have
been lower than fixed rates
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and we've been in a market
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for the most of the time... except for very recently
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where interest rates were always going down
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so if you're in a market where you expect interest rates to go down
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or stay steady
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then variable will probably be a really good option to go for.
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Number two is if the "spread" is wide between fixed and variable
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So the Bank of Canada posts interest rates
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and you can find out
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what the going rate is for fixed
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and what the going rate is for variable
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and if there's a big "spread"
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that means there's more of an opportunity
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to capitalize on that middle
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and get yourself a much lower rate.
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So let's go over the cons of a variable rate mortgage.
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Well, the big one in the room is this
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if interest rates go up, your payments are going to go up.
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So you've got to be
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financially prepared to handle something like that.
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Another thing is, are you the type of person
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who likes to monitor interest rates and keep an eye on your investment?
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Unlike fixed, where you 'set it' and 'forget it'
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if you're on a variable rate mortgage
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you need to pay attention to what's
going on in the market
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because if you kind of clue out for 6 months
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you could turn around and find out you're paying
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a heck of a lot more in interest
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and your payments are slowly going up and up and up.
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Finally, if money's tight for you
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and you need stability and your monthly payments
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then a variable rate mortgage might not be the right choice for you.
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At the end of the day,
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this is where it comes down to personal preference.
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Well, I hope you enjoyed my video on fixed-rate mortgages
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versus variable rate mortgages.
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This is just a quick video to give you an idea
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of the different products out there
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I highly suggest you talk to your bank
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or find an awesome mortgage broker
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and they'll be able to break this down even further
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and when you're dealing with them, ask them the questions
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based on your lifestyle of what's better for you.
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At the end of the day there's no right or wrong answer
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you just need to find out what works for you.
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Well there you have it
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I'm Jeff O'Leary - The Village Guru
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I hope you enjoyed this video
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and if you did give it a thumbs up
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subscribe to my channel and share it with your friends.
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Thanks for watching and we'll see you soon!
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