The difference between variable and adjustable mortgage rates

Advice September 8, 2022

The easiest graphic to remember! With much chatter in the interest rate world (it’s the popular backyard barbecue topic of discussion right now, isn’t it?), we wanted to share a short info blurb on it.

Variable and adjustable rate mortgages fluctuate ongoingly as the BoC prime rate changes.

Adjustable rate mortgages allow you to keep contributing a consistent amount to your principle. The interest portion just changes as fluctuations occur. Therefore, the monthly payment amount changes. This is harder for budgeting purposes for some people.

Variable rate mortgages allow the monthly amount to remain the same (static, in mortgage terms), but your portion going to principle changes. This is why your amortization (time frame it takes to pay your debt) fluctuates.

Then there’s a trigger rate. Trigger rates are those at which the bank gives you a call, or sends you a letter. This is because with VRMs, it could theoretically happen that no portion of your monthly payment goes to your principle. This is no bueno for you or the bank.

We certainly understand the basics but are not mortgage experts. You absolutely have to discuss these things with your lender, and determine which scenario is best for you and your family, your budgeting and your goals.

Image credit to GuelphToday. They have a great article for more info.