Maybe this blog post title actually has you wondering what exactly that means. If you’re thinking about buying a home sometime soon, these ideas are very important and you will want to know what they mean and how they work! Today’s blog post will explain these terms, why they’re important to you, and how you should make decisions relating to them.
Defining the Terms
A fixed rate mortgage means that when you get a mortgage, you agree to stick with the current interest rate for each year you pay off your mortgage. (So if the current interest is at, say, 6% this year, next year, you will also pay 6% interest next year, whether the current interest rate goes up or down.)
A variable rate/adjusted rate mortgage simply means that your interest rate will change every year with the current interest rate every year as you pay off your mortgage. (So, if the current interest rate is at 6% this year, that’s what you’ll pay for this year. Next year, you will pay whatever the current interest rate is for that year, whether it’s 5% or 8%.)
This is probably the most simple way we can explain this.We could give you more details, and by all means, if you have questions, please give us a call and we’ll be happy to chat about it!
Of course, both seem to offer value. But how do you know which one is right for you? Ultimately this comes down to asking yourself a few questions.
- Do you prefer security?
- Are you a bit of a gambler and wouldn’t mind trading security for the potential opportunity to get a lower interest rate?
- What’s the current interest rate?
- Are there predictions of the interest rate coming down or going up in the future?
- How long do you plan to take the mortgage out for?
- Are you more interested in smaller payments now?
Ask yourself these questions, and give us a call. We’ll be happy to talk you through which type of rate would be best for you. There’s no right answer and there isn’t one that works for everyone. It depends on the individual, their comfort level, their financial situation, as well as the current and prospected financial environment. Give us a call today and we’d love to help you out!