Is A Fixed Mortgage Rate Better?
We hear all the debate about whether or not a fixed mortgage rate is better than a variable mortgage rate, but that has much to do with the fact that not everyone is that knowledgeable about the difference between the two. By knowing the difference between the two, a person is able to make a more informed decision.
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And if you’re wondering about the variable rate mortgage, it is simply a mortgage loan that has a fluctuating rate. It fluctuates with changes in the base interest rate. Sometimes it may be cheaper and other times it can be more expensive, so an individual does have to be prepared when this occurs.
But Let’s look at the fixed mortgage rate.
The fixed mortgage rate is something that can vary. It really depends on the type of mortgage that you are looking for. For instance, you may wish to have a fixed rate for a 5 year term. If this is the case, you can expect to see an interest rate of around 6.84% during that period. The good news, however, is that you will know what your rate will be month-to-month. With a variable rate mortgage, you may find that next month’s bill will be higher than this month’s bill, but that is something to be prepared for when getting a variable rate mortgage.
However, it is important to know in a fixed rate mortgage that the lower the term, the lower the interest rate. For example, you will find that a 1 year fixed rate mortgage will have an interest rate of around 5.89%. As you go up in term, the interest rate gets a little higher. This is because your risk actually increases the longer you go. It is easier to see how things are going to turn out in a year than it is to see five years in advanced.
Compared to the variable rate mortgage, it isn’t too much different in the way of interest rates. All variable rate mortgages, regardless of term or amount, will remain to have an interest rate of around 6.91%. It can vary based on what the base rate is at the time and what the bank deems appropriate. The bank may look at your credit file and decide that they need to charge you a higher interest rate because you may be of a greater risk. This is something that emphasizes the importance of maintaining your credit file to the best of your ability.
Nevertheless, you can take comfort in the fact that there is a fixed rate mortgage out there that will work for you. You need to check with the various financial institutions in your area to find the one that has the best rates. If they have low standard rates, you can bet that your rate will be lower than the next guy who has a higher standard rate. It doesn’t not matter your credit situation. So just make sure you shop around because you will have to deal with the bank you picked for the term of your loan and you can’t really change your mind, so make sure you choose wisely.