Know your options for mortgage interest

With the Canadian resale housing market booming, and indications that the Bank of Canada will increase interest rates on June 1st, there's been a lot of attention lately regarding the various options available for mortgage loans.Whether you're applying for a new mortgage, or thinking about refinancing before the predicted rate increases hit, it's important that you know your options so you can make an informed decision.

When you choose a mortgage, you have to decide whether you want the interest rate to be fixed, variable or adjustable. There's no one right choice. Each of these three options offers various advantages. Your task is to choose the one that's right for your specific needs.

According to the Canada Mortgage and Housing Corporation (CMHC):

1) A fixed rate mortgage is locked-in for the entire term of the mortgage.

2) With a variable rate, the payments remain the same each month, but the interest rate fluctuates based on market conditions.

3) For adjustable rate mortgages, both the interest rate and the mortgage payments vary based on market conditions.

When making your mortgage choice, be sure to evaluate the impact of an increasing interest rate on your monthly payment.