Buying a home

A research paper by Dr. Moshe Milevsky, Associate Professor of Finance at York University, reveals some compelling evidence. His study, which examines Canadian mortgage interest rates data from 1950 to 2007, finds that choosing a variable rate mortgage would have saved consumers $20,000 in interest payments over 15 years (based on a $100,000 mortgage). He contends consumers would have been better off borrowing at prime rate (variable) compared to a 5-year fixed rate 89% of the time.

Variable Rate mortgage is best for you if:

• you are comfortable with rate fluctuations to gain possible long term savings
• you have the flexibility to accept possible increases in your amortization should the interest rate increase

Fixed Rate Mortgages are best for you if:

• you are willing to pay a slightly higher interest rate for the security of a rate guaranteed not to change during the term of the mortgage
• you prefer your payments and amortization to be fixed for the duration of your mortgage