3.5 % 5 year fixed or prime - 0.5 % closed variable ?

P.S. : I know better rates may be out there...but this is what I have to choose between.

Thanks.

P - 0.5 doesn't sound too attractive.
If these are your choices, I'd pick the fixed at 3.5%.

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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."

-- Rhett Butler in "Gone with the Wind"

Assuming similar prepayment and bump up options, yeah 3.5 fixed is real good. Recently when I hunted, I got options of upto p - 1 ARM or 3.69 fixed only.

May be u can negotiate a better variable rate?

With the possibility of another minority govt, I won't bet on sharp prime rate hikes.

Given all other factors being good and USD appreciating, we may see over night reaching 3.5. Not my opinion - from what all I'm reading including the doomsday predictions.

It is hard to say that the interest rate will keep going up..

If a bank is ready to give u 3.5 fixed then they are in all likely hood expecting interests to remain low.

I have heard recently people getting prime - 1 for variable, so us should shop around.


I am expecting another recession around the corner due to high gas prices, high commodity prices, US credit rating drop and Japan Tsunami.

Effect of all these events has yet to show up on the balance sheets , so once they start showing up , the recession is gonna hit us for sure.

Economists suggest variable is a far better instrument than fixed interest mortage from a consumers point of view.

If u are getting prime - 0.8 or less than u should def switch to variable.

I personally like variable over fixed for the following reasons.

1> Variable interest mortgage usually can be closed by paying 3 months interest as penalty. For fixed int mortage u have to pay interest differential which works to thousands of $
This is a advantage if u have to sell ur house before ur 5 year mortgage term is up.

2> Variable rate is lower that fixed so u get up front benefit of lower interest rate in the first year of buying the house when u are probably in need of money.