Quote:
Originally Posted by GGG
How sensitive is he to payment changes.
If a 2% increase in interest rate will cause him financial stress then I would lock in for longer. Variable vs Fixed and 2 vs 5 is about risk tolerance and flexibility as opposed to trying to guess what is going to happen next.
So questions like
Is his income going to be higher 2 years from now? If no then the ability to handle rate hikes is lower
Is he planning on selling and not re-buying in Canada? If yes than shorter is better
Can he afford a 2% higher rate at time of renewal?
Can he afford the higher 2 year fixed today?
Are you willing to bail him out if he can afford payments at some point.
In general over the past history of mortgages variable is lower cost. The problem is that we live in a discrete moment in time so on average shorter and more variable should pay off however you have to live with the fluctuations.
Anyway the short answer is don’t try to big the cheapest outcome pick the option with a risk profile you can tolerate.
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After 17 years my son’s condo is being bought out due to fires in the complex. He is not happy about the timing/situation and dislikes change of any sort. Still early in the process so I haven’t seen any actual numbers yet. He will probably go for a 5-year if it’s at all feasible.