Wondering if you should lock into a great fixed rate or go with an unbelievable variable rate? Tough call right? Your colleagues at work took a variable and can’t believe the unbelievably low effective rate they are paying. Your parents are conservative old school and think it would be foolish to pass up on locking in a fixed 5 year for less than 3.50%. What are you to do?
Take the best of both worlds! Go for a 50/50 mortgage where you get a variable rate and fixed rate combined into one.
At the time of writing the effective rate for a 5 year variable rate mortgage is 2.55% with very little probability that the Bank of Canada prime rate will change in the near to mid-term. A fixed 5 year is at 3.49%. The spread between the two options is only 0.74%. If you are a consumer trying to decide fixed versus variable, it would be difficult to determine which option will out perform the other. We are really in uncharted territory… both have pros and inherent drawbacks.
Here’s how you can protect yourself: take a 50/50 mortgage. The 50/50 mortgage allows you to lock half of your balance as a fixed rate and the remaining half as a variable rate mortgage. In doing so you are benefiting from the positives of each and spreading the risk over your entire mortgage.
Most people would agree that investment diversification is the key to a solid investment portfolio. The same holds true for your mortgage: Rate diversification.
There are only a handful of lenders who offer these great 50/50 mortgage products. One of my favorites is Merix Financial who are currently offering their 50/50 Wise Mortgage at 3.02%
If you have any questions or would like to feel out whether a 50/50 mortgage is the right fit for your mortgage needs get in touch with us. We're here to help you and best of all, we're compensated through a finders fee so our service won't cost you a thing. 416.461.0204 or simply fill out our contact form and we'll be in touch with you.