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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

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.

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.