Nearly half of the prospective homebuyers aiming to purchase property over the next two years are intending to do so with a hybrid mortgage, says a recent survey conducted by the Royal Bank of Canada.
These numbers are up eight per cent from those attained in the same survey conducted by RBC last year. Yet, according to the Canadian Association of Accredited Mortgage Professionals (CAAMP), virtually all Canadian homeowners with mortgages currently, or 94 per cent, have either a fixed rate or a variable mortgage. This means that only a potential six per cent of the market has actually committed to a hybrid mortgage.
Hybrid mortgages grant homeowners the best of both mortgage rate worlds and manage risk. They allow you to allocate a portion of your mortgage payment to a secured fixed rate, and a portion to a variable floating rate. Mortgage specialists refer to a hybrid as mortgage diversification, stating that just as diversification is an asset in managing one’s investment portfolio, so too is it beneficial to your mortgage. If rates go down, below your fixed rate, you are saving money. If they go up, you are cutting your losses.
Not every lender provides hybrid mortgages. Inquire with your mortgage broker as to which ones do, and if they could be the product for you. Some advisers still say that committing all of your mortgage to a variable rate will save you more overtime, but during periods when rates rise, you must be able to budget for higher payments if you want the principal portion of your payment to remain the same.