Fixed Mortgage Vs.
Variable Rates: Which Is Right For You?
With all the financial
decisions that need to be made when purchasing a home, choosing the options
that make the best sense for you can seem overwhelming. Given the uncertainty of interest rates and
the security of lenders, deciding what type of mortgage to choose and from whom
to borrow can be a difficult and time-consuming task. One of the most important decisions is what
type of mortgage to choose. The choice
between a fixed rate and variable rate mortgage can be an intimidating task if
you are not armed with the facts, so here are a few things to consider before
making a decision.
What Is Your Current
Financial Situation?
One of the most important
considerations to take into account before choosing a fixed rate or variable
rate mortgage is knowing your current, short-term, and long-term financial
outlook. Historically, those who choose
a variable rate mortgage end up on the winning end of the deal. Since rates fluctuate with the economy, and
fixed rates are in most cases higher than variable rates (depending on when you
took out your mortgage), the saving in the long term can be quite
considerable. If you are in a current
financial situation in which your budget cannot handle the potential ups and
downs of a variable rate, and a regular monthly payment makes more sense, then
a fixed rate is probably a better choice.
What Is Your Long-Term
Financial Outlook?
Another decision to make
when selecting a loan is the amortization period and the length of your current
mortgage interest rate agreement. If
your current financial outlook is very similar to your long-term financial
outlook, then you may want to consider a longer term, variable rate loan. If, however, you are likely to have a
considerable change in your income through expected promotion, retirement, or
one income being lost, then choosing a shorter term, fixed rate may be the
better choice.
Regardless of your
financial situation, it is always important to get the advice of a qualified
financial advisor, and ensure that you get your mortgage through an established
and reputable lender.
