Protecting Yourself From Mortgage Rate Inflation

If you want to protect yourself from mortgage rate inflation, there is only one real thing you can do: work with your Toronto mortgage agent to get a fixed rate mortgage.

What is a fixed rate mortgage?

A fixed rate mortgage is a loan where the interest stays the same throughout the entirety of the loan's duration. A fixed rate mortgage is also fully amortized, meaning that the full amount of the loan is paid equally throughout the lifetime of the loan.

What other types of loans are there?

Of course you want to know all about your other options before deciding. So, here are the other loan options available to home buyers:

• Interest only mortgage
• graduated payment mortgage
• variable rate (includes adjustable rate mortgages and tracker mortgages)
• negative amortization mortgage
• balloon payment mortgage

Most of these loans can 'balloon up' or have 'floating interest rates.' Make sure to do all of your research on these loans way ahead of time, especially if you decide that a fixed rate mortgage isn't for you. (Although we have no idea why you would if you really do want protect yourself from mortgage rate inflation.)

What are the benefits of getting a fixed rate mortgage?

First and foremost, you are protecting yourself from mortgage rate inflation. A loan with a fixed interest amount can not rise. Yet there are other benefits to getting one of these loans. Such as the fact that you know the exact payment you must make every month. Since you know this amount, you can build a budget around it without worry you will come up short.

What is the downside of getting a fixed rate mortgage?

Since your interest rate will always stay at the same amount, that interest might be slightly or significantly higher than what you would initially pay on a floating interest mortgage. You should talk to your mortgage brokers in order to see if that higher initial rate will benefit you in the long run, or if it is not worth pursuing. We thinking that it is, but only your mortgage broker will be able to tell you for sure.