GemInite
Nov 8th, 2009, 10:43 PM
I'm a bit confused about how interest rates work. I was under the impression that if rates went up then your monthly would go up. But according to TD/RBC if rates change your monthly payments stay the same it's just the amount that's paid to interest that changes. Does this apply to just variable?
I guess I'm confused because I read all the articles where they are like be prepared for when interest rates go up you'll have to pay more.
http://www.tdcanadatrust.com/mortgages/select.jsp
Fixed rate or variable rate
When you take out a fixed-rate mortgage, your interest rate will not change throughout the entire term of your mortgage. As a result, you'll always know exactly how much your payments will be and how much of your mortgage will be paid off at the end of your term.
With a variable-rate mortgage, your rate will be set in relation to TD MORTGAGE Prime at the beginning of each month. In other words, it may vary from month to month. Historically, variable-rate mortgages have tended to cost less than fixed-rate mortgages when interest rates are fairly stable.
When rates change, your payment amount remains the same. However, the amount that is applied toward interest and principal will change. If interest rates drop, more of your mortgage payment is applied to the principal balance owing. This can help you pay off your mortgage faster.
Royal banks page
http://www.rbcroyalbank.com/products/mortgages/mortgage-rates-overview.html
Variable Rate Mortgage
With a variable rate mortgage, mortgage payments are set for the term, even though interest rates may fluctuate during that time. If interest rates go down, more of the payment is applied to reduce the principal; if rates go up, more of the payment is applied to payment of interest. Variable rate mortgages may be open or closed.
A variable rate mortgage provides you with the flexibility to take advantage of falling interest rates and to convert to a fixed rate mortgage at any time.
- Barry C.
I guess I'm confused because I read all the articles where they are like be prepared for when interest rates go up you'll have to pay more.
http://www.tdcanadatrust.com/mortgages/select.jsp
Fixed rate or variable rate
When you take out a fixed-rate mortgage, your interest rate will not change throughout the entire term of your mortgage. As a result, you'll always know exactly how much your payments will be and how much of your mortgage will be paid off at the end of your term.
With a variable-rate mortgage, your rate will be set in relation to TD MORTGAGE Prime at the beginning of each month. In other words, it may vary from month to month. Historically, variable-rate mortgages have tended to cost less than fixed-rate mortgages when interest rates are fairly stable.
When rates change, your payment amount remains the same. However, the amount that is applied toward interest and principal will change. If interest rates drop, more of your mortgage payment is applied to the principal balance owing. This can help you pay off your mortgage faster.
Royal banks page
http://www.rbcroyalbank.com/products/mortgages/mortgage-rates-overview.html
Variable Rate Mortgage
With a variable rate mortgage, mortgage payments are set for the term, even though interest rates may fluctuate during that time. If interest rates go down, more of the payment is applied to reduce the principal; if rates go up, more of the payment is applied to payment of interest. Variable rate mortgages may be open or closed.
A variable rate mortgage provides you with the flexibility to take advantage of falling interest rates and to convert to a fixed rate mortgage at any time.
- Barry C.