The variable and short term rates look so attractive! The question is – Can you sleep at night? How long do you plan to stay in your home? Answering these questions will help you decide what term to choose.

Mortgage rates don’t always change when lending rates go up or down but often they do. This can be very stressful because even a small change in rates can mean a huge change in payments. It is unlikely your income will increase at the same pace. This can result in a serious cash crunch.

Although it has been proven that choosing a variable rate or short term (low rate) mortgage term results in paying less interest over the life of the mortgage, you must have the flexibility in your monthly budget to handle payment changes. For example, if your payment is $1,000 at 3% and rates increase to 5%, your payment will increase to approximately $1,250.

During my time at the bank, many clients renewed to a variable or short term option because the lower rates were attractive however, 9 out of 10 converted to a longer, fixed rate term within 6 months because they found it too stressful.

The other consideration is if you think you may sell your home, it may be wise to align the mortgage term with your plans otherwise paying out the mortgage early could result in a large pre-payment penalty.