A Mortgage is type of lending that enables you to pay a portion of home’s cost upfront, while the money a lending institution loans you covers the remainder. Despite you having a lot to gain from taking a mortgage, it’s imperative to know the numerous ins and outs of the process to set yourself up for financial success. Mortgage interest rates that accompany your loan play a part in what you will repay over the long run. As you compare rates, lenders, and options, it is vital to comprehend how interest rates affect you.
Fixed vs. Variable Rate Mortgages
When you’re choosing a mortgage, you’ll be able to choose between two separate types of interest rate: a fixed rate mortgage or a variable rate mortgage. A fixed rate mortgage is a mortgage with an interest rate that doesn’t change at all over the life of the loan. A variable rate mortgage is different. A variable rate mortgage has an interest rate that can fluctuate over time depending on the market and other factors.
The Difference Between Fixed & Variable Rate Monthly Mortgage Payments
While a fixed mortgage’s interest rate will not change over time, a variable rate mortgage’s will, making for a difference in how monthly payments work for the life of the mortgage.
Fixed Rate Mortgage Payments
Fixed rate mortgage payments will stay consistent throughout the life of the loan, as your interest rate will not fluctuate. You can expect the same monthly payment throughout the life of your loan with a fixed rate mortgage.
Variable Rate Mortgage Payments
As interest rates can change with a variable rate mortgage; your monthly payments will most likely not remain consistent throughout the life of the loan. At some times, your mortgage payment may be lower due to a lower interest rate based on the market. And at other times, your mortgage payment may be higher due to a higher interest rate.
There is no best answer on which mortgage is right for everyone, as each mortgage should be considered on a case by case basis to fit the specific financial situation and needs. If you’d like to learn more about mortgages, mortgage interest rates and more, download our informative eBook now!
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