The Bank of Canada is rapidly raising interest rates in an effort to reduce inflation, cool the demand for goods and services and in turn, make everyday life more affordable for Canadians. For homeowners with a variable rate mortgage, we understand there may be uncertainty about the impact rising rates will have on your mortgage and finances.

What happens when rates change:

• When rates increase, your scheduled payment does not increase – rather, more of your payment is allocated to the accrued interest, and less to the principal.
• When rates decrease, more of your payment is allocated towards paying down the principal of your mortgage.
• When less of your payment is applied to your principal, your amortization will increase, which means it will take longer to pay off your mortgage.
• When it’s time to renew your mortgage, your amortization schedule will be brought back to its original timeline. In the case where a rising prime rate has resulted in less of your payment being applied to your principal balance, your mortgage payment will likely increase at the time of renewal, possibly by a large amount.

Questions? Get in touch with your Mortgage Agent, or let us introduce you to our highly recommended and trusted Mortgage Partner!