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Did you know that when you take out a fixed-rate mortgage, you're paying a big "safety premium"? That's because banks usually set their fixed rates at considerably higher levels than their variable rates. They do so to ensure that a fixed-rate mortgage will still be profitable for them if interest rates rise.

If you're a potential homeowner, you should ask yourself if that premium is worth paying. It may protect you if interest rates spike up suddenly. But if they don't, you may end up paying thousands of dollars in extra interest. That's an expensive insurance policy.

Historically, variable-rate mortgages have proven to be cheaper than those with fixed rates over the long term. Even if you feel that interest rates will rise in the near future, you should take a long-term perspective. With a variable rate mortgage, you are usually starting out at a lower rate to begin with, and you will benefit from any decreases in interest rates that occur in the future.

Banks and other financial institutions offer a variety of variable-rate mortgages, often with special incentives. CIBC, for example, offers a rate of 1.01% below its prime rate for the first nine months of its Better Than Prime mortgage. For the rest of the 5-year term, it gives a rate of 0.25% below prime.

Before deciding on the type of mortgage that's right for you, talk to your financial advisor or personal banker.