What’s the best mortgage in 2021? Envision Financial Branch Manager Manjit Lally says the answer is different for everyone.
“Mortgages aren’t one-size-fits-all, so a good advisor should offer a custom approach,” she says. “Right now the hot topic is rates: variable or fixed? But it’s not just about the rate, it’s also about your needs.”
What are your plans for the property?
What’s your five year plan? Are you going to stay put, or is there a chance you’ll move?
“If you break your fixed rate mortgage in the first three years the penalties are really high, so that might not be a good fit if your plans are uncertain,” Lally says.
You may intend to move to a bigger home when you start having kids, or a smaller one when the kids are done school. You may start off sharing the mortgage with family members — either to help qualify for the loan or because you’re living together. If you expect that living situation to change, discuss it with your mortgage advisor before committing to terms. You should also let your advisor know if the mortgage is for a rental property, not a primary residence, since that will likely affect your commitment to the home.
“Renovations are another consideration. If you choose a fixed rate, you wouldn’t want to touch the mortgage to help pay for renovations. Variable is a better choice if you need to borrow more and prefer to have one payment,” Lally says.
What kind of borrower are you?
A fixed rate mortgage is great if you want to ‘set it and forget it.’ You’ll be able to budget and make plans around regular payments.
“With a variable mortgage the onus is on you to keep up with the market for rate changes, which is great if that’s something you enjoy,” Lally says.
What does the future hold?
“Historically, variable rates have been a better bet, but the market is very unusual right now. Fixed rates are extremely low, and many of our members are taking advantage,” Lally says. “Rates are expected to stay pretty low for the next two to three years to stimulate the economy’s COVID-19 recovery.”
If you just look at the market, both fixed and variable rates are good options for borrowers right now. But Lally says many borrowers shy away from fixed rates to protect themselves from unexpected challenges.
“Life happens, and you may be forced to move. One solution, even if you’re in a fixed mortgage, is a Portability Option. Not all brokers have it, but Envision Financial certainly does. If the borrowers are staying the same, you can keep your old rate and avoid penalties by moving the mortgage from one property to another. Terms and conditions apply, but it’s good to know you have options!”
No matter what your situation, Lally says it’s important to take your time and educate yourself. Take documents home and make sure you understand them, so you’re not surprised by fees.
Envision Financial is a division of First West Credit Union.