Is a Flexible Mortgage Right for You?
A mortgage is a loan given to you by a bank, typically in the form of a variable-rate long-term debt. The difference between a fixed rate mortgage and a variable rate mortgage is that with a fixed rate mortgage, the interest rate remains unchanged throughout the entire term of your loan. With a variable-rate mortgage, over time your interest rates will change according to the financial markets. A flexible mortgage is an adjustable-rate mortgage that has been structured to offer more flexibility than other types of mortgages. A flexible mortgage can be an excellent option if you’re not sure how long you’ll need your home for and want to avoid being locked into one particular interest rate for the life of your loan.
Here are some benefits and drawbacks to consider before deciding if this type of mortgage would work for you:
What is a flexible mortgage
?
A flexible mortgage is an adjustable-rate mortgage that has been structured to offer more flexibility than other types of mortgages. With a traditional fixed-rate mortgage, the interest rate remains unchanged throughout the entire term of your loan. With a variable-rate mortgage, over time your interest rates will change according to the financial markets. A flexible mortgage can be an excellent option if you’re not sure how long you’ll need your home for and want to avoid being locked into one particular interest rate for the life of your loan.
Pros and Cons of a Flexible Mortgage
Pros of a flexible mortgage
-You can secure your desired interest rate
-You could take advantage of a low interest rate when the market is high and automatically convert to a higher interest rate when the market is low.
Cons of a flexible -Flexible mortgages are usually riskier than fixed mortgages since you’re more likely to pay more over time.
-The mortgage term will depend on how much you owe versus your home value, which can make it difficult to budget for the long term.
-If rates change too quickly, you may end up paying more in monthly payments or having to repay your loan sooner than expected.
When to Consider Changing Your Mortgage
The best time to consider changing your mortgage is when you are considering purchasing a new home. If you were to take out a fixed-rate mortgage for a term of 10 years, but then decided that you wanted to sell your home in 5 years, you would be stuck with the same interest rate for an additional 5 years. For this reason, it is important to weigh your options when deciding what type of mortgage will suit you best.
If there is any chance that you won’t need or use your current home for the entire life of your loan, it might make sense to consider getting a flexible mortgage. This way, if needed, you can adjust the term of your loan according to the amount of time that you’ll actually need or use it.
Conclusion
A mortgage is a big decision, and one that can be difficult to navigate. Especially if you’re considering making a switch from a fixed-rate mortgage to a variable-rate mortgage or want to consider a flexible mortgage.
A variable-rate mortgage is an option for those who plan on staying in the same home for a long time or want to take advantage of the current low rates.
A fixed-rate mortgage is generally great for those who are looking for stability and want to lock in a mortgage rate for the foreseeable future.
The best thing to do is explore the options and find what’s best for you.