One of the first steps when picking a mortgage is picking what type of mortgage you want. Knowing the difference between a fixed and variable rate will help you determine the type of mortgage you want.
A Fixed Rate Mortgage means that whenever you sign your mortgage you are locked in at that rate for the duration of your whole mortgage. You set it, and don’t have to worry about it until the duration of your mortgage is up. A con might be that you could be paying more if the rates ever decrease.
A Variable Rate Mortgage means that your rate fluctuates over the period of your mortgage. The good thing is that you usually can start out at a lower rate. The con would be that with your rate fluctuating, it could change with little to no notice. This could result in you paying more in the long run.
The major thing you need to consider when choosing a mortgage is your income. Can you afford a fluctuating rate? Or do you need to know what your budget is to a tee. If you can afford a fluctuating rate, a variable rate might be an option for you over a fixed rate mortgage.
The second thing you should consider is your personality. If you are a person that is always worrying about whether their rate is going to go up, you should probably stick with a fixed rate mortgage instead of a variable rate mortgage. A fixed rate might give you more sleep at night because you don’t have to worry about it.
Variable Rate Mortgages seem to be the least popular choice in today’s market. They are still an option, but people tend to go for the more secure and budget friendly option. You can’t go with a variable rate mortgage and just expect to pay the minimum monthly payment. Its all about what works for you and your personality. Clients sometimes would rather a fluctuation in prices, some will like to know what set amount they are paying all the time.