Adjustable Rate vs. Variable Rate Mortgages
Understanding the difference between an Adjustable Rate Mortgage (ARM) and a Variable Rate Mortgage (VRM) is essential. While both are influenced by interest rates, they impact your payments differently.
Adjustable Rate Mortgage (ARM)
An ARM adjusts your mortgage payments whenever the prime rate changes. This means your monthly payment can fluctuate, potentially lowering your costs when rates decrease. However, your payments could rise if rates go up.
Variable Rate Mortgage (VRM)
A VRM keeps your monthly payment fixed, even if interest rates shift. This provides stability in budgeting, but if rates increase, a larger portion of your payment goes toward interest rather than the principal.
Why This Matters
In 2023, many Canadians with VRMs hit their trigger rates, meaning their payments were no longer covering interest. With rates constantly shifting, choosing the right mortgage structure is more important than ever. If you need guidance, reach out to us.