With Governor Mark Carney hinting that the Bank of Canada will be increasing interest rates comes Scotiabank’s UVRM (Ultimate Variable Rate Mortgage) offering protection from rate increases.
What the Ultimate Variable Rate Mortgage Offers:
- “Low interest rate” with cap rate protection
- Fixed payments that will not increase with changes to prime
- More of your payment going to principal
- Convert to a fixed rate at any time
- 15/15 pre-payment privileges (15% lump sum payments and increase your regular payments by 15% each year) along with Match a Payment and Skip a Payment options
- Available for both high ratio and conventional mortgages
- Flexible payment frequencies
- Monthly compounding frequency
Taking a Closer Look
Great product! It offers the best of both worlds, really. Scotiabank’s 3-year fixed rate sits at 3.99% and their UVRM (also a 3-year term) is priced at Scotiabank’s prime rate, which currently sits at 3%. But the UVRM will never exceed the cap rate at 3.99%! Hmmm, let’s see would I rather go fixed for 3 years at 3.99% or would I rather start off at prime knowing that my variable rate will not exceed 3.99? No brainer, variable, please!
The guaranteed no change to your regular principal and interest payment is due to the fact that your payment is calculated using the cap rate. I like this; essentially you are paying off your mortgage faster (at the fixed rate) by applying more to the principal amount with an inflated payment. As long as your interest rate is lower than the cap rate you are paying off your mortgage faster with the fixed payment feature.
Most institutions will offer a variable rate for a conventional or high ratio mortgage; they often offer flexible payment frequencies, generous pre-payment privileges (15/15 is in line with industry standards), monthly compounding and the ability to convert to a fixed rate at any time. What does impress me is the additional “match a payment” and “miss a payment” options. You can pay double the amount of your regular payment at any time as many times as you would like each year! If you’ve matched a payment, then you can miss a payment.
Final Thoughts
This product has a lot to offer. However, if you are in the market for a variable rate mortgage, there may be a more competitive rate out there for you. Speak to a mortgage professional to find the product that best suits your needs and be sure you are getting what you pay for!
