When exploring your options for a mortgage on your new home, there are a range of factors to consider. If you find having the choice in the first place to be overwhelming, it is important to understand what the differences between a fixed rate and a variable rate really are. This way, you can be better informed to make the best decision for your own personal circumstances.
A fixed rate mortgage means you are consistently charged the same interest rate each month for the entire duration of your mortgage until you either renew it or pay if off completely. Some home owners may take comfort in this option because they know what they need to pay every bill cycle and there are no surprises. On the other hand, if there is a significant drop in interest rates, someone locked in to a higher rate will suddenly be paying more than they probably needed to be.
A variable rate mortgage is, quite naturally, the opposite. As the market changes, so does the interest rate on your mortgage and, therefore, the amount you owe. This option is entirely dependent on the market, but as the rates drop, so does your mortgage. Not being locked in allows you to reap the rewards when it comes to fluctuations. On the other hand, if the rates increase, you endure those too.
The end result
Obtaining a mortgage requires conducting some research and finding out some information as to which route to take, fixed or variable. Regardless of which option you choose, this is another stepping stone in homeownership that every individual who wants to purchase a property must face. Which type of mortgage is most suitable to your needs, however, is personal, but may also benefit from some professional guidance.