Save Big On Your Mortgage
by News Canada
(NC)-Did you know that when you take out a
fixed-rate mortgage, you're paying a big "safety premium"? That's
because banks usually set their fixed rates at considerably higher levels than
their variable rates. They do so to ensure that a fixed-rate mortgage will still
be profitable for them if interest rates rise.
If you're a potential homeowner, you should ask yourself if that premium is
worth paying. It may protect you if interest rates spike up suddenly. But if
they don't, you may end up paying thousands of dollars in extra interest. That's
an expensive insurance policy.
Historically, variable-rate mortgages have proven to be cheaper than those with
fixed rates over the long term. Even if you feel that interest rates will rise
in the near future, you should take a long-term perspective. With a variable
rate mortgage, you are usually starting out at a lower rate to begin with, and
you will benefit from any decreases in interest rates that occur in the future.
Banks and other financial institutions offer a variety of variable-rate
mortgages, often with special incentives. CIBC, for example, offers a rate of
1.01% below its prime rate for the first nine months of its Better Than Prime
mortgage. For the rest of the 5-year term, it gives a rate of 0.25% below prime.
Before deciding on the type of mortgage that's right for you, talk to your
financial advisor or personal banker. You can find out more at your local CIBC
branch, or go online at www.cibc.com.
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