Mix and match mortgage
By MYKE THOMAS, Calgary Sun Homes
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One of the biggest decisions faced by new home buyers, or those renewing a mortgage, is what type of mortgage is best for their particular needs -- a fixed-rate or variable-rate.
A fixed-rate mortgage locks in your rate for a set period of time, while a variable-rate floats at the whims of the prime lending rate.
If you're looking for locked-in security and knowing exactly what your monthly payments will be for the life of the mortgage, you'll likely pick the fixed rate; risk takers with a little more financial flexibility, most times will choose the variable rate.
And then there are those, probably born under the Zodiac sign of the Twins, who spend half their time with their heads above water and the other half diving into the deep end.
Coincidentally, as we move into the sign of Gemini this weekend, RBC Royal Bank has introduced a 50/50 mortgage, allowing homeowners to equally divide their mortgages between an open variable rate and a discounted, five-year fixed rate, with an option to pay off the variable portion at any time, without penalty.
"Choosing between fixed- and variable-rate mortgages doesn't have to be a dilemma anymore," says Chris Barber, senior manager, product innovation and programs. "Being able to diversify interest rates within a mortgage makes good sense for many homebuyers."
Barber says the new product was launched in response to an RBC survey, conducted in January, which showed 30% of Canadians planning to put a down payment on a new home expected to take out a fixed-rate mortgage. Some 23% said variable rate, while 38% indicated a combination of the two.
The 50/50 mortgage is available to homeowners with 25% equity in their home and other conditions may apply.