Mortgage Guide: A Look At Adjustable Rate Mortgages

As we wrap up this edition of our mortgage guide do not forget to check out the previous posts that looked at fixed rate mortgages, amortization length, and variable rate mortgages.

The normalization and trends of the Windsor real estate market over the summer has provided those who were not able to find a home in the past but want to own a home a fresh opportunity. The Bank of Canada raising their key rates has caused some cooling in the market and buyers see it as a new, and maybe better, chance to buy. So they are restarting their searches for houses for sale in Windsor. Our post here is a piggyback on the variable rate post as we take a look a step deeper into adjustable rate mortgages and how they differ from variable rate mortgages.

Let's start with the major difference between a variable rate and adjustable rate mortgage. With an adjustable rate your payments DO fluctuate with changes to the prime rate. The strategy remains the same as variable however, with higher payments to minimize the principal and minimize the effect of rate changes. However in the case of adjustable rate mortgages the changes in prime do not affect your amortization period. It affects your actual payment, so you will never experience negative amortization. It means rate increases like we have seen can cause you to suddenly be unable to afford your mortgage and put you at risk of default. The Bank of Canada’s recent and possibly future actions show the volatility and risks of an adjustable rate mortgage. If you are considering this option be sure to discuss locking in rates if economy indicators signal a possible rate, and payment, increase

Remember, everything discussed here and in the past posts exist to help you create a base of knowledge so when you sit with a mortgage adviser you’ll be better prepared as they help walk you through the options based on you and your needs and situation. If you need a recommendation for a mortgage adviser, let us know and we can get you in touch with some of the best in the area.

Here at Jump Realty our agents will give you honest advice on what course of action is best for you in their professional opinion and will always put taking care of your best interests first! With offices in Windsor, Tecumseh, Kingsville, LaSalle, and Chatham, no matter where you are, a Jump agent is ready to help. Please contact us for any housing needs and let us give you a better real estate experience!