> Mortgage Centre | Mortgage 101: Fixed Versus Variable Rate

Mortgage 101: Fixed Versus Variable Rate

One of the most common questions first time home buyers have is: what is the difference between a fixed rate and a variable rate mortgage? Deciding between a fixed rate and a variable rate mortgage is one of the most important decisions first time home buyers will have to consider. Choosing the mortgage that works best for you will depend on your lifestyle, income, and your personal financial preferences. Here is some more information about fixed rate and variable rate mortgages from the brokerage experts at Mortgage West - The Mortgage Centre.

What is a Fixed Rate Mortgage?

A fixed rate mortgage is a housing loan in which your monthly payments and interest rate will remain the same for the duration of your mortgage contract. This is the more popular mortgage choice for the majority of Canadians. A fixed rate mortgage provides certainty and stability—with a fixed mortgage plan, you can rest assured that your payments will always stay the same regardless of fluctuations in the housing market. This makes a fixed rate mortgages the ideal choice for new home buyers or buyer who are concerned about staying within budget.

What is a Variable Rate Mortgage?

A variable rate mortgage is a housing loan in which your mortgage rate will change by a specified amount according to changes in the prime lending rate. Fixed rate mortgages tend to have higher premiums, so a less predictable variable rate mortgage with a lower premium may be preferable in some instances. The important thing to consider before committing to a variable rate mortgage is whether or not you could cover a significant increase in your mortgage payment if the prime rate were to increase.

Choosing between a fixed rate and variable rate mortgage is one of the most important decisions any home buyer can make. The right mortgage for you depends on your current income, your future financial planning, and your own budgeting preferences. For more information about the different mortgage options available to you and to discuss the pros and cons of each, contact experienced mortgage broker Rose Blankenagel at Mortgage West - The Mortgage Centre today.