Should I change my mortgage to fixed?

[therev23]

Mortgage amount: $1,000,000
Current payment; $6501,55
Rate: 6.45
Term left: 2 years, ten months.

Fixed mortgage rate (three years): 5.23%
New payments: $5,745.51

Thank you!

Edited to add current mortgage amount

 

[chondricthyes]

@therev23

1. Can you tolerate a rate change upwards?
2. Can you predict the future?

If the answer to the first question is "no", then maybe you should go with fixed rate unless you can predict the future and see rate cuts coming down the pipe. If the answer to the first question is "yes", then probably stay variable unless you can predict the future and see rate hikes coming down the pipe.

Personally, I've gone with 5-year fixed terms every time since 2003, and every time except the last time it was the "wrong" choice. But the last time, it was so much the "right" choice that I looked like a wizard (I'm currently at 2.54%).

None of us have a crystal ball, unfortunately.

 

[iholyland]

@therev23 If you switch, you save $25,652 within 2 years and 11 months. (This is napkin calculations so do your own math.) If your switching cost is less than that, you should def switch.

 

[danny123]

@therev23 Take the fixed, and then increase your payments to the same you would have/are currently paying on the variable.

My napkin math has you saving roughly $29,000 doing that, after accounting for a 100 basis point drop in rates over the next 3 years.

Obviously I’m assuming a lot, but even with pretty aggressive rate cuts the fixed comes out on top.

If you don’t keep the payment the same, then a 100 basis point drop over the next 3 years slightly favors the variable by a few hundred.

 

[mathek]

@therev23 Wow.