Before the Bank of Canada (BOC) announced its rate hikes, variable mortgage rates were popular. The potential for monthly payments to decrease made them an attractive option for homeowners. But with the fifth increase in the BOC’s rates, many homeowners in Montreal are now considering refinancing their private home mortgage loans from a variable to a fixed-rate mortgage.

So, you may be wondering if locking in your mortgage rate is the right move for you. That will depend on a couple of factors.

Fixed Rate Mortgage Vs. Variable Rate Mortgage

A fixed-rate mortgage has a consistent interest rate throughout the entire term. This model means that your monthly payments will not change, even if the BOC raises its rates. It can provide stability and predictability for homeowners, especially those on a fixed budget.

On the other hand, a variable-rate mortgage has monthly payments fluctuating with the BOC’s rates. Your monthly charges may go up or down depending on inflation and economic conditions. It can save you money in the short term but also carries more risk.

Factors to Consider for Refinancing Home Loan to Switch to a Fixed Rate

The recent increase in the BOC’s rates may make locking in your mortgage rate seem like a more attractive option. But it’s essential to consider the long-term impact and how refinancing can help you save money. Here are some factors to consider.

The Length of Your Stay in Your Current Home

Staying in your current home for a shorter period may not make refinancing to a fixed rate worth it. The fees associated with refinancing can add up, and it may take several years for the savings from a fixed rate to outweigh these costs.

Stability of Your Income

Locking at a fixed rate can provide peace of mind if your income is stable and you have a consistent budget. However, if there is uncertainty around your revenue or funding in the future, a variable rate may offer more flexibility.

The Current Interest Rates 

Interest rates are not permanent and may change in the future, but it’s essential to consider the current interest rate environment when making your decision. If the fixed rates are currently at a historic low, it may be worth locking in before they potentially increase.

Your Appetite for Risk

Locking in a fixed rate can provide more stability, but it may also mean missing out on potential savings if the variable rates go down. Your comfort level with risk and ability to handle possible fluctuations should be considered when making your decision. It may be worth making the switch if you’re losing sleep over the rising variable rates.

Refinancing Your Home Loan to Switch to a Fixed Rate

The decision to refinance your home loan and lock in your mortgage rate should be based on your financial goals and situation. If you decide to refinance, North East Real Estate & Mortgage Agency offers refinancing options for homeowners looking to switch from a variable to a fixed-rate mortgage. Even with a bad credit score, our experienced team can help you refinance and find the best mortgage options for your needs. Contact us for more information on our rates and processes.