Is it time to Lock-In your Variable Rate Mortgage?

I get this question fairly often. Fixed Interest Rates are expected to start going back up starting today, but there's no need to panic. Variable Rates are not changing and are not expected to change for another 4-10 months.

What should you do? You should make sure you are taking full advantage of your Variable Rate mortgage "prepayment privledges" by contacting your mortgage company and asking them to simply increase your payment by 10% to 20%.

Why should you increase your payment? Since your Variable Rate is currently in the 1.35% to 2.25% range, most of your payment is paying down your Principal and very little is paying interest charges. By increasing your payment, you will pay substantially more toward your Principal and your mortgage balance will drop quickly.

If you locked in your mortgage rate by converting to a fixed rate mortgage, your payment would increase, but you would be paying substantially more towards interest and your mortgage balance would be reduced very slowly.

By increasing your payment on your Variable Rate mortgage, you will be mortgage free quicker and therefore own your home that much sooner.