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Originally posted by arcrave

So I had a meeting with my broker last evening, She is offering me 4.25% for 6 months and then it would be 5.6%. Its variable with 3 year term reviewed quarterly ( as opposed to 8 times a year ). Another product is Prime - .95 ....

I was pre-approved ( before the rate increase i.e in dec ) for 5.09 ( 5 year fixed ). I asked for other details and basically she is saying that i can pay up to 20%/month over my regular payment and 54K/per year on top of that 20%. I am thinking of opting for variable ?? wondering if this is a good deal ? anything I am missing and should be careful about ??

Thanks

ps: I had posted this question as part of another discussion but thought posting new would give it more visibility ...

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Hi Arcrave,

There are a number of variable products being offered by the financial institutions. Every institution would claim their product to be the best. However, the best product would be the one which suits you most and saves you money. You have to study these products and the type of rates and flexibility they offer and then should come to an informed decision. An ethical mortgage broker instead of pushing a particular product would first like to understand your needs and requirements, your short term and long term objectives and then should suggest you products from which you should decide what is best for you.

As a thumb rule, the variable products which offer 'deep discounts' for the full term rathar than 'teaser rates' are better product.

Secondly, you have to see how the interest is being compounded, semi-annually or monthly. A variable product of prime -0.90 which compounds the interest semi annually would be better than a variable product which offers prime -0.95% but compounds the interest monthly.

Similarly, some banks would charge you an extra of 0.25% premium if the mortgage is high ratio and this would turn out to be not a very good product.

Some banks would not give you the best discounted rates for the fixed rates should you decide to convert your variable rate mortgage in to a fixed term later.

Similarly, some banks would not offer you the facility of paying weekly or bi-weekly payments with their variable product.

Hence, a well qualified and honest mortgage broker would tell you about all these options and conditions even you without asking for them as it is his/her duty to let you know every thing about the product he/she is suggesting you.

If your broker is not doing this then may be you should seek a second opinion.