Originally Posted by Pretty Flowers

I don't know what the name for my mortgage type is, but I think it's a good option.

I have a five year mortgage where I pay a fixed amount ( I think this is equivalent to 5% per year. Within that the mortgage interest rate varies, so the real rate I pay is about 2.4% at the moment. However, because I make a fixed payment every month, I'm paying about $400 per month in interest, and the rest is paid to the principle. If interest rates increased above 5%, the amount I pay still stays the same, but a smaller proportion is paid off the principle.

As rates have been significantly lower for the whole of the last five years, this means that I only have about 11 years of payments to make to pay off the mortgage in full. It's always seemed to be a better option than fixed (as I take advantage of lower overall rates) and variable, as I still know how much I'm paying each month.

Originally Posted by Pretty Flowers

In other news, I think that one of the rate comparison sites suggests that variable rate mortgages are typically better value for money than fixed. IIRC, this was 81% of the time....

Originally Posted by Almost Canadian

It sounds like you are on a variable rate mortgage. Most variable mortgages in Canada take the same amount of money from your bank account each month and simply weight the interest payment/principal payment depending upon the rate at the time. They do not increase/decrease each month as an English mortgage does. However, unlike an English mortgage where the repayment period remains the same, the Canadian ones increase or decrease the repayment period (referred to as the amortization period here).

Originally Posted by conjonway

Can't find the data right now to back it up (someone here can tell me if I'm wrong) but I was informed that historically over the last 20 years variable has been the better option by far.

Originally Posted by Atlantic Xpat

That's Not the way my discount rate variable mortgage works. The bi-weekly payment varies with the prime interest rate (I have prime - 0.8%) so every time prime changes the payment changes. The amortisation period/term doesn't change. I took this mortgage out when rates were a lot higher. Some years ago I told them not to reduce the payment any further so have been overpaying for a few years. That, will of course, reduce the overall mortgage term.

Originally Posted by Souvy

This is interesting stuff.

He also told me told go argue the toss about the mortgage. We're four years into a 5-year fixed at 5.79%. We could almost halve that (2.99%). Even if we had to pay the full penalty for early redemption, which is apparently highly negotiable, we'd still get our money back in under a year.

For some reason - I didn't ask the question - he told me to avoid variable rate mortgages.