Adjustable Rate Mortgages

An adjustable rate mortgage is perfect for someone who wants to save as much money as possible. However, you must be able to tolerate the increases and decreases of an adjustable interest rate.

An adjustable rate mortgage is linked to a lender’s prime rate. The rate for your adjustable rate mortgage will be the lender’s prime rate plus a premium or minus a discount. When the prime rate changes, payments are automatically adjusted (increased if the rate goes up, and decreased if the rates go down) so that your original amortization schedule is maintained.

Historically speaking, an adjustable rate mortgage shows savings 90% of the time when compared to a fixed rate mortgage. That being said, the trade off for the savings is a higher risk level, since you’ll never know what your mortgage rate could be the next day. If you begin to get uncomfortable with the fluctuating mortgage rate, lenders do give you the option to lock into a fixed rate at that date’s current rate pricing.

If you’d like to know if an adjustable rate mortgage could be for you, be sure to discuss it with a Calgary mortgage broker!