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Variable VS Fixed Rate Mortgage

by Daj

RBC's 5 year fixed rate mortgage is 4.19%.

Their 5 year closed variable rate mortgage is prime (2.25%) plus 0.0%.

Their 5 year open variable rate mortgage is prime (2.25%) plus 0.7%.

Is there any reason not to opt for the 5 year closed variable rate?

By the way, your website is beautifully organized and easy to navigate. Dividing your information into bite sized pieces works extremely well. Thanks for making real estate transactions comprehensible.

Comments for
Variable VS Fixed Rate Mortgage

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Jan 08, 2010
 Varible Vs Fixed
by: Anonymous

It comes down to which one is a better rate.
If you use the 5 year fixed rate, then you should not break the term, because it's not a good idea to pay penalty. I am not sure what is the penalty fee (mention that I should check it out).

5 year variable open sounds good to me, because I can take advantage of the low rate at the moment. Yes, the rate will go up later, but I also can lock it at any point. But one thing to notice is, say after 1 year the rate looks higher, and I feel like to lock it down, then I need to find out the policy to lock it. Must I lock for a 5 year fixed rate, or a 4 year fixed rate?

I hope it helps.

Dec 19, 2009
 Re: Open Versus Closed Variable Rate Mortgages by RBC
by: Tom Karadza

Hi Daj,

Thanks for the feedback, much appreciated!

The 5 year closed is obviously the better rate as you mention.

However, make sure you're planning long term. If you ever have to break that 5 year mortgage you'll pay a penalty. Ask what that penalty will be so that you're prepared.

A few years ago I had to break a 5 year closed mortgage and paying the penalty wasn't fun.

So that would be my number one concern. If that's not an issue for you then the lower rate will likely save you thousands.

Hope that helps!

Tom.

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