Based on the video, Dalia Barsoum recommends sticking with a variable rate mortgage because the premium between fixed and variable rates is at an all-time high of roughly 1.5%. This means variable rates would need to rise significantly before costing more than fixed. Additionally, variable rates offer superior flexibility for investors who may need to refinance, switch lenders, or sell with minimal penalties.
As a general rule of thumb shared in the episode, for every $100,000 in mortgage debt, a 0.25% rate increase results in approximately a $15 per month payment increase. For example, on $1 million in total mortgages, a 0.25% hike means roughly $150 more per month, while a full 1% increase translates to approximately $600 more per month.
Instead of immediately locking into a fixed rate, the transcript suggests several strategies: stretching your amortization to lower monthly payments, consolidating expensive debts elsewhere in your budget to absorb the increase, or temporarily converting all or part of your mortgage to an interest-only payment to reduce monthly obligations.
Variable rate mortgages provide flexibility to lock in at any time without penalty or re-qualification if floating rates become uncomfortable. More importantly for investors, they allow you to switch to another lender with minimal penalty if refinancing terms change, and you can sell the property without worrying about large breakage penalties.
