If you have a variable rate mortgage in Canada, you can experience fluctuating interest rates. And it can give you sleepless nights. That’s why, to be prepared, you might ask- when can you lock in a variable rate mortgage? Is it possible to switch to the stable fixed rates?
There is good news. But the answer is not as simple. So, read ahead to understand the process, the timing, and possible trade-offs when you lock in.
Can You Lock In a Variable Rate Mortgage?
The straight answer, you cannot lock in a variable-rate mortgage, but you can convert. Many Canadian lenders allow you to convert. You can convert your variable-rate mortgage to a fixed-rate mortgage anytime during your term.
Keep in mind, this means the variable rate itself is not locked. That rate will float according to the market prime rate. What this means is you are converting your variable-rate product to the lender’s current rate product. This way, you are not kept waiting for renewal.
How to Lock In a Variable Rate Mortgage: 3-Step Process
Here are the steps to follow to lock in a variable-rate mortgage:
Step 1: Decide, Contact and Request
First, decide whether you will wait for rates to rise or convert to fixed rates. Then call your bank or a trusted mortgage lender like Asim Ali. They will do all the tasks for you.
Step 2: Explore Offers by Lender
Your lender will give you their current fixed-rate options. They will present different term lengths to determine mortgage rate. It can be a 3-year fixed term or a 5-year fixed term. This rate will not depend on your original variable rate.
Step 3: Choose & Confirm
You select the fixed-rate term that works best for you. An expert lender will then fully process the switch.
Note: Here’s something you need to remember. In most cases, there are no prepayment penalties for converting to a fixed rate. However, once you are in the new fixed-rate term, don’t break the term early. That can involve penalties!
Factors to Consider Before Locking In a Variable Rate Mortgage
If you want to switch between variable and fixed rates, you need to consider the following aspects:
Current Interest Rates: Do a quick comparison. How do the current variable rates compare to the fixed rates that you have on offer? Remember to lock in, or you will miss the future increases.
Market Trends & Forecasts: Look at what predictions say. Check whether rates might fall or be flat. If forecasts are strong, you can lock in.
Your Risk Tolerance: Find out how comfortable you are with payment fluctuations. If uncertainty stresses you too much, locking in can be undeniably peaceful.
Remaining Term Length: Talk to your lender. How long do they need the fixed term to be? It may be as long as the time remaining on your original term.
Key Takeaways: Variable Rate Lock-in
If you’re on two boats, when can you lock in a variable rate mortgage? Contact a professional mortgage broker for personalized guidance. They will know how to help you make the smartest decision for your financial future.