Fixed vs. Variable Mortgage Rate

There has been a lot of debate whether a fixed mortgage rate is better or a variable mortgage rate. Here's a little information to help you make a more informed decision.

A variable rate is simply a mortgage loan with a fluctuating rate. It changes with activity in the base interest rate. It can be a very good deal at times and at other times you may feel like you received the short end of the stick. This is because with a variable mortgage rate, there is a possibility that the next month's bill will be higher than this month's bill. This is something to be prepared for when getting a variable rate mortgage. Anyone interested in this type of rate should really know what they are doing.

Even though it may not seem like it a fixed mortgage rate is something that can vary itself. It just depends on what you are looking for. However, it is vital to know with 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 the term, the interest rate will get a little higher. This happens because your risk increases the longer you go. It is easier to predict how things are going to end in a year versus seeing ten years in advance.

Compared to the variable rate mortgage, There really isn't a big different in the way of interest rates. All variable rate mortgages, in spite of of term or amount, will remain to have an interest rate of around 6.91%. It can vary based on what the base rate may be at the time and what the financial institution will approve. The financial institution might look at your credit and decide that they need to charge you a higher interest rate because you currently have a greater risk. It is always wise to try to keep your credit clean.

Nevertheless, you may relax with confirmation in knowing that there is a fixed rate mortgage out there for anyone that can afford it. You should check with the various financial institutions in your city to find the one that has the best rates for you. As long you have savings, assets, and income you should be fine no matter what your credit situation may be. So just be sure to shop around because you will have to deal with the bank you picked for the length of your loan. Purchasing a home is the biggest purchase people usually make in their life, take your time and make the right choice there are no second chances.