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Going with a variable rate mortgage would have been better at least 75% of the time, as possibly as much as 90%: * https://www.ratespy.com/the-most-misconstrue

Going with a variable rate mortgage would have been better at least 75% of the time, as possibly as much as 90%: * https://www.ratespy.com/the-most-misconstrued-study-in-mortgage-history-03105681 https://www.ratespy.com/the-most-misconstrued-study-in-mortg... * http://astarmortgage.com/pdf/moshe.pdf http://astarmortgage.com/pdf/moshe.pdf We just happening to be in a rising rate environment currently. There are two types of variable mortgages: > With a fixed payment, when prime rate rises you simply pay more interest and less principal, and vice versa when prime falls. But your actual payment stays the same (unless rates soar so much that you’re not even covering the minimum interest due, which is rare). > That’s opposed to an adjustable rate mortgage (ARM) where both your payment and interest cost vary as prime rate fluctuates. * https://www.ratespy.com/offers-fixed-payment-variable-mortgages-03275087 https://www.ratespy.com/offers-fixed-payment-variable-mortga... > With a VRM, a rise in the interest rate leaves the regular mortgage payment unchanged but the interest charged rises and the amount of the payment allocated to pay down the principal balance drops and this means it will take longer to pay-off the mortgage. A lower rate has the opposite effect accelerating your pace of mortgage repayment. > With an ARM, a rise in the interest rate results in a rise in the regular mortgage payment to cover the higher interest cost to ensure that the dollar amount allocated to pay down the mortgage principal remains intact. On the flip side, a drop in rates will drop your regular payment without accelerating the pace with which you repay the debt. * https://www.mortgagesandbox.com/news/types-of-variable-rate-mortgage https://www.mortgagesandbox.com/news/types-of-variable-rate-...

happyopossum 4y ago
That kind of analysis really only works well for people who make a lot of housing purchases, and have cash reserves to cover rising rates. For most people, who get one mortgage on their primary home (which they live in), the potential downside if you’re in that 25% is ‘lose your house’, so it’s not unwise to go with a fixed rate that you know you will be able to pay for the life of the loan.
- bryanlarsen 4y ago
  It's often the opposite, at least in Canada. In Canada, fixed rate is only fixed for 5 years. A variable rate mortgage goes up and down gradually. A fixed rate mortgage sees massive changes in rate every 5 years.
  - itsoktocry 4y ago
    Most banks have 10 year fixed, too. But going long term fixed means you're in a forecasting competition with the bank. It's no gimme.
  - chx 4y ago
    Yes but it's way easier to make one decision every five years than worry every. single. year how the latest news will affect my mortgage.
- throw0101c 4y ago
  > That kind of analysis really only works well for people who make a lot of housing purchases, and have cash reserves to cover rising rates. The VRM has no rising costs: your monthly payments are the same. It's just the amount of principle paid off each month changes: * if rates rise (like now), less principle is paid off * if rates drip (the 10 years before this particular moment), more principal is paid off But what gets taken out of your chequing account would be the same.
  - itsoktocry 4y ago
    VRMs also have a trigger rate where payments increase, you can't accrue principal. Not sure how the banks will handle this yet, it's not in their interest to crush marginal mortgage holders.
  - refurb 4y ago
    Considering a bunch of Canadians are hitting trigger rates (interest > current per month payment) and seeing either 50% increases in monthly payments or request to make lump sum payment of tens of thousands, I’d say that’s not true.
  - ryanisnan 4y ago
    I don't quite understand what you mean by "The VRM has no rising costs: your monthly payments are the same." This is definitely not the case. My mortgage payments have gone up by hundreds of dollars per payment.

happyopossum 4y ago

That kind of analysis really only works well for people who make a lot of housing purchases, and have cash reserves to cover rising rates. For most people, who get one mortgage on their primary home (which they live in), the potential downside if you’re in that 25% is ‘lose your house’, so it’s not unwise to go with a fixed rate that you know you will be able to pay for the life of the loan.

bryanlarsen 4y ago
It's often the opposite, at least in Canada. In Canada, fixed rate is only fixed for 5 years. A variable rate mortgage goes up and down gradually. A fixed rate mortgage sees massive changes in rate every 5 years.
- itsoktocry 4y ago
  Most banks have 10 year fixed, too. But going long term fixed means you're in a forecasting competition with the bank. It's no gimme.
- chx 4y ago
  Yes but it's way easier to make one decision every five years than worry every. single. year how the latest news will affect my mortgage.
throw0101c 4y ago
> That kind of analysis really only works well for people who make a lot of housing purchases, and have cash reserves to cover rising rates. The VRM has no rising costs: your monthly payments are the same. It's just the amount of principle paid off each month changes: * if rates rise (like now), less principle is paid off * if rates drip (the 10 years before this particular moment), more principal is paid off But what gets taken out of your chequing account would be the same.
- itsoktocry 4y ago
  VRMs also have a trigger rate where payments increase, you can't accrue principal. Not sure how the banks will handle this yet, it's not in their interest to crush marginal mortgage holders.
- refurb 4y ago
  Considering a bunch of Canadians are hitting trigger rates (interest > current per month payment) and seeing either 50% increases in monthly payments or request to make lump sum payment of tens of thousands, I’d say that’s not true.
- ryanisnan 4y ago
  I don't quite understand what you mean by "The VRM has no rising costs: your monthly payments are the same." This is definitely not the case. My mortgage payments have gone up by hundreds of dollars per payment.