Adjustable Rate Mortgage

Adjustable mortgage Adjustable Rate Mortgages are home loans that follow the prime lending rate in Canada. Most of these mortgages are offered on a 5 year term. They are available throughout Canada and usually have no geographic or irregular credit restrictions. They are available for purchases, first time buyers, refinances, renewals, debt consolidations and rental properties.

Apply for an Adjustable Rate Mortgage

An Adjustable Rate Mortgage is generally a lower rate then the current fixed rates that are available to mortgage borrowers. When a borrower requests an Adjustable Rate Mortgage, they are usually familiar with how the market operates. They know where prime rate is and they have no problem watching the market for changes or following the Bank of Canada announcements.

DID YOU KNOW: Like the closely related variable mortgage, industry terminology and standards for naming have not been set in stone. Several lenders often inappropriately refer to their variable rate products as adjustable, and their adjustable rate products as variable. Even more confusing, many variable rate mortgage products have stable payment options that can make them similar to ARMs.

When and if an Adjustable Rate Mortgage is no longer attractive, the borrower may lock into a very competitive fixed rate mortgage term. The lock in terms available can range from a 1 year to a 25 year term depending on the remaining months left in your term. Meaning, if you have chosen a 5 year Adjustable Rate Mortgage and you are already 2 years into the term, you only have to lock in for a 3 year fixed term if you like. You can also lock into a longer term (up to 25 years) than the original 5 year term if you desire. The minimum combined term of either fixed or adjustable, must be equal to a minimum of 5 years though.

Although adjustable and variable rate mortgages are similar in that they track the prime, they differ on one major point: How changes in rates affect your principal, payments and interest. In an adjustable rate mortgage, your payments are a constant amount, as opposed to in a variable rate mortgage, where your payments vary with the rate. For an adjustable rate mortgage, the constant payment is accomplished by changing your principle and interest. Because of the unchanging payment amount, adjustable rate mortgages are far easier to budget around.

A few points to consider before choosing this type of mortgage:

Adjustable Rate Mortgages are NOT the same as Variable Rate Mortgages
The mortgage payment will stay constant when the prime rate fluctuates.
The mortgage can be locked in at any time to the LOWEST available rate at that time

Alberta Equity Mortgage brokers can assist you in determining if the Adjustable Rate Mortgage is right for you.

Adjustable rate mortgages at a glance

PROS:

These mortgages follow the prime lending rate, so you'll generally be paying less interest over your term than in a fixed rate mortgage.
You can choose to lock in at a very competitive rate whenever you like.
Adjustable rate mortgages are easy to budget around, as your payments do not increase or decrease.
If rates decrease, your constant payments can dramatically shorten the life of your mortgage.

CONS:

You must keep an eye on the rate; otherwise increases in the prime rate can erode your equity.
If rates increase, your constant payments cover more interest and less principal, effectively lengthening the life of your mortgage.

Alberta Equity has helped over 50,000 people find and qualify for the best mortgages in Canada for over ten years. We do all of the heavy lifting and ensure that you get the best mortgage rates and product features available. Apply online for a free, no obligation consultation.

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