Courtesy of Bernice Lim, from Street Capital, we bring you an updated variable / fixed comparison.

The comparison takes as a base the prediction of many economists, who see rate hikes of as much as 300 BPS Within the next 2 years. Keeping this in mind, the comparison has been updated to reflect a 300 BPS increase over the next 24 months.

• It compares a mortgage at P-50 (currently 1.75%) to a 5 yr fixed at 4.49%
• It factors in increases in prime over the next 24 months. Prime would go up to 5.25%
• It places the monthly payments for both products to be the same (take the variable product, but make payments at the fixed rate).

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The variable product has net savings of over $4,700 over the 5 year term  – even with a 300 BPS increase in prime!!!

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Results of Comparison
Mortgage amount of: $250,000.00

• Option 1  / Option 2 Principal Balance after 5 Years $214,688.59 $219,454.81
• Option 1 Interest savings (-$costs) at end of 5th year: $4,766.22
• Option 1 results in paying more (-$less) in mortgage payments after 5 years by -$0.00
• Option 1 principal balance after 5 years will be -$4,766.22 less than the Option 2 Mortgage
• The Option 1 mortgage has an advantage (-$disadvantage) of $4,766.22 over Option 2 after 5 years

* This sheet is for information purposes only and accuracy is not guaranteed.

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Tags: Fixed Rate, Principal Balance, Variable Rate