“It doesn’t change very much unless there is a really big spread between [the two rates]. A lot of it has to do with how experienced people are. An older person who has been through several [interest rate] cycles is more likely to go with variable rate than a younger person,” Mortgage Professionals Canada chief economist Will Dunning told the Financial Post
However, a more obscure—but nevertheless commonly available—route exists: combination mortgages, which might help make obligations more manageable for consumers.
A combination mortgage features debt with maturity spread across a period of years. One example of such a product is the Scotia Total Equity Plan, which permits clients to break down their loans in different products, so long as said money is still within the borrowing limit.
“Some customers will take more than one mortgage component, it could be a fixed term, a variable term or even part of it as a line of credit,” Scotiabank vice president (real estate secured lending pricing and marketing) Janet Boyle explains, adding that a 70/30 ratio for locked-in/variable is common among those who go for this option.
The arrangement offers unique advantages, Boyle assures, especially for those who want to purchase a home and occupy it only for a short duration before moving out again. In such a scenario, the flexibility of a combination mortgage programme would yield lower monthly mortgage bills, thus allowing the home owner to take on greater debt as needed.
“Certainly we discuss diversifying your assets,” Boyle says of adopting a similar strategy to one’s debts.
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Debt is a growing concern among Canada’s consumer population, and most borrowers go for either fixed-rate or variable programmes, with little room for switching between the two throughout the lifetime of the interest payment.