As interest rates continue to climb, many homeowners with variable mortgages are starting to worry about trigger rates and increased payment amounts. If you are wondering if you should switch to a fixed-rate mortgage or stay with your variable mortgage, it is important to understand what your options are before making a final decision. As a leading provider of lending solutions, the team at PHL Capital Corp knows how stressful the recent interest rate increases have been for homeowners with variable mortgages. That is why we have provided some information on various options to help you determine which solution is best for your needs and budget.
Learn what a mortgage trigger rate is.
If you currently have a variable mortgage and are worried about rising interest rates, you have three options:
If you have a variable mortgage, you can easily convert to a fixed mortgage by contacting your mortgage lender and requesting to switch. This switch can usually be performed without incurring any penalties, though it is important to note that switching from a variable to fixed mortgage is far easier than switching from fixed to variable. Should you wish to switch back, you will likely need to pay a significant penalty to do so. Switching from a variable to a fixed-rate mortgage will provide you with total peace of mind in terms of rising interest rates, as your payments and the amount of interest you pay will no longer be influenced by rate hikes. On the other hand, your payments will likely be much higher than they were with your variable-rate mortgage. This means that this option is ideal for homeowners with lower risk tolerances and room in their budget for a significantly larger mortgage payment.
Your second option is to refinance your mortgage entirely. This involves breaking your current mortgage and taking out an entirely new one, leaving you free to select the best option for your needs and budget. While this option can result in a lower interest rate than you would receive by converting your existing mortgage, you will need to pay all penalties and fees associated with breaking your mortgage. In addition to these fees, you will also need to be approved for a new mortgage and hire a real estate lawyer to complete the new transaction. In summary, this option can provide you with lower monthly payments, but it will require additional work alongside the payment of various fees. To determine if this option is right for you, it is strongly recommended to determine what the fees/penalties for breaking your mortgage would be before seeking out a new mortgage.
Your third option is to continue with your existing mortgage if you have not hit your trigger rate. Your payment will remain the same as it has been, but you may hit your trigger rate soon if interest rates continue to rise. Should this occur, you will need to increase your monthly payment amount, make a lump-sum payment, or convert to a fixed-rate mortgage. This option could be suitable if you are still not close to your trigger rate or if you can increase your monthly payments to ensure that you do not reach your trigger rate.
Determining which option is best for you will depend on the details of your current mortgage, your budget, and your level of risk tolerance. To make an informed decision, it is best to speak with an expert about your options and contact your lender to ensure that you have all the information you need regarding your current mortgage.
To learn more about our lending solutions, get in touch with the team at PHL Capital Corp. We can be reached by phone at 604-579-0847 and will be happy to answer any questions you may have regarding mortgages or our application process.