Variable Rate Mortgage Daryl French Nov 1, 2009 - 5:32:02 PM RSS?

Variable rate mortgages (VRM's) are they all the same??

The simple answer is no and the fact is that a lot of people don�t realize it.

The most common mistake people make when getting a variable rate mortgage (VRM) is clients just focus on the current rate or discount below prime, yet often clients who take variable rate mortgages (VRM) are planning to lock in their VRM when they feel rates are going to start moving upwards again in say 12 to 18 months.

The problem is when do you decide to lock in the VRM to a fixed mortgage? Are there penalties or fees to the lender? And at what rate do you lock in? Do you get the current discounted rate or the lenders posted rate?

You have to remember that the majority of the time a variable rate mortgage (VRM) is actually a closed mortgage. The lender has you tied up and is less likely to be aggressive on the discount. There are few lenders that guarantee in writing up front that you get their lowest advertised rate at the time you lock in so long as you lock into a fixed rate mortgage of 3 or more years.

So if you are in a 5 year term and you decide to lock in your rate and you have 3 years remaining, which was more important, the discount below prime on the variable rate mortgage (VRM) or the rate you lock in at, for 3 to 5 more years?

Ask your Mortgage Specialist to help you to put together a plan that will not only help you today but down the road as well.

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