When the time comes to choose a mortgage that is right for you, be sure to consider all of the different options. Depending on your lifestyle and your financial stability, one of the most important decisions you make will be whether or not to choose a fixed-rate mortgage or variable-rate.
A fixed-rate mortgage is a type of mortgage that has a fixed rate of interest for a specific period of time (whatever the term is for your mortgage). This means that you know exactly what portion of each mortgage payment goes towards your principal each month and what portion is used to pay interest. A fixed-rate mortgage provides security and stability as for the contract term, you are always aware that your interest rate will remain fixed (even if the market rates jump higher).
A variable rate mortgage is a type of mortgage that typically has fixed payments but fluctuating interest rates. This means that although the mortgage payment amount may not change numerically, the amount that is paid towards the principal and the amount paid towards interest may alter as interest rates fluctuate. With a variable rate mortgage, rates are often lower however, there is risk in them changing so it is not predictable as to how long it will take you to fully pay back your mortgage.
Whether or not to choose a fixed-rate or variable rate mortgage depends on a number of factors; market stability, your lifestyle, financial security and job stability are only a few. With a variable rate you may end up paying less interest over time, but there is risk that you may pay more. With fixed rates, you may pay a slightly higher interest rate, but you have security and stability.
Sit down with a mortgage professional to find out what option is best for you!
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