Not All Variable Rates are the Same.

Choosing the mortgage that's right for you involves a little bit more than merely deciding whether you're a fixed or variable type of person - particularly if you opt for a variable rate mortgage.

It's not enough to choose a variable rate mortgage based solely on rate - you also have to consider what type of variable rate you'd prefer. Below is a breakdown of the most common types:

1. Adjustable Rate Mortgage
An Adjustable Rate Mortgage, otherwise known as an ARM, will see your mortgage payments adjust with every Bank of Canada announcement that causes the Prime rate to increase or decrease. Some lenders will change your mortgage payment immediately, while others - like ING Direct - will evaluate it every three months.
2. Standard Variable Rate Mortgage
A Standard VRM will allow you to maintain the same monthly payment throughout your mortgage term, but the percentage of that payment that goes towards interest will change according to the Bank of Canada's prime rate.
 3. Capped Variable Rate Mortgage
A Capped VRM comes with a built-in limit as to how high your mortgage payment can go within a given term (usually the cap is equivalent to the 5-year fixed rate at the time of signing). While your interest rate may change on a monthly basis, your payment remains the same. If interest rates rise above the capped rate, your mortgage payment won't change.
Each type of variable rate mortgage comes with its list of pros and cons, so it's important to ask a lot of questions and make sure you understand each product before signing on the dotted line. Remember, we're here to help - so ask away!