This loan features a variable interest rate based on SARON (published daily).
You can select a term of between 2 and 5 years and combine your SARON loan with another mortgage loan to reduce interest-rate risk.
If rates rise and you decide that the SARON loan no longer meets your needs, you can request to switch to a fixed-rate mortgage loan with a term equivalent to the remaining term of the SARON, at the end of any billing cycle.
This variable-rate loan is based on SARON, which moves up or down each day based on the day-to-day money-market transactions carried out by banks.
Since SARON is not known in advance, the amount of your interest payment is only determined at the end of the quarter.
If SARON rises during the quarter, your interest payment will be higher than the previous quarter.
Before taking out a SARON mortgage loan, you should:
- understand the characteristics and risks of this type of loan
- have sufficient liquidity on hand to cover a higher quarterly interest payment in the event that rates rise sharply.
We also recommend that you keep a close eye on both short- and long-term interest rates, so that you can quickly change mortgage products if needed in the event of major fluctuations.
You can reduce the risk arising from the rate fluctuation of a SARON mortgage loan by dividing your mortgage loan into several tranches with different maturities.
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