What’s a Five-Year Variable Rate Mortgage and How Does It Work?

A five-year variable rate mortgage is a home loan where the interest rate can change over five years. Unlike fixed-rate mortgages, where your rate stays the same, variable rates can go up or down depending on the market.

How Does It Work?

When you get a five-year variable rate mortgage, your lender sets your rate based on a benchmark called the prime rate. If the prime rate increases, your mortgage rate and payments might increase too. If it decreases, you could pay less.Your payments usually stay the same each month, but the amount going toward interest or your loan balance changes. In a rising rate environment, more of your payment goes toward interest.

Why Choose a Variable Rate?

Variable-rate mortgages can offer lower rates than fixed-rate ones, at least initially. This can help you save money if the market conditions stay stable. In cities like Toronto and Ottawa, keeping an eye on the best mortgage rates Toronto or mortgage rates Ottawa can help you decide.

Is It Right for You?

A variable rate mortgage works best if:

• You’re comfortable with changing rates.
• You expect rates to stay low or go down.
• You plan to sell your home or refinance before five years are up.

However, if you prefer stability or are worried about rising rates, a fixed-rate mortgage might be better.Talk to a mortgage expert to explore your options and find the best choice for your needs. Whether you’re in Toronto, Ottawa, or anywhere else, understanding your mortgage helps you save in the long run!