When you are looking to purchase a home, refinance or renew your Milton mortgage it is important to look at the different kinds of options available to you. This blog post will look at the differences between the two most popular types of mortgages: fixed rate and variable rate.
Fixed Rate Mortgage
Simply put, a fixed rate is a rate that remains the same for the entire life of the loan. They are one of the most popular mortgage products in Canada. Fixed rate mortgages feature an interest rate that is “fixed”, for a period of time, usually between 1 and 5 years.
One of the drawbacks of fixed rate mortgages is that interest rates tend to be slightly higher than other types of mortgages where the rate changes; so even you gain stability, you do pay more for it, with a higher mortgage interest rate. Five-year fixed rate mortgages are one of the most popular mortgage products in Canada.
One of the benefits to a fixed rate mortgage is that it’s easier to manage a budget with a fixed rate mortgage, since your payments won’t change during that term. Another benefit is when interest rates are low and expected to rise over the length of the term, as it allows you to lock in the low interest rate, and not have to worry about it rising – although predicting interest rates is far from a sure thing.
Variable Rate Mortgage
A variable rate mortgage is a type of mortgage where the interest rate of the loan changes based on the current prime rate. With a variable rate mortgage, though, your monthly payment remains the same because the fluctuating amount is the amount of the payment that’s applied to the mortgage principal. A variable rate mortgage allows you to have some stability by having consistent monthly payments, but allows you also take advantage of the benefits if interest rates fall. Also, with variable rate mortgages, the rates are usually lower than they would be with a fixed rate mortgage.
There are some basic questions you need to ask yourself when you are looking at which Milton Mortgage is right for you:
- How long do you intend to live on the property?
- How large of a mortgage payment can you afford today?
- What direction are interest rates heading and do you anticipate that trend to continue?
- Could you still afford a variable rate mortgage if interest rates rise?
At the Loewen Group our goal is to represent you by reviewing your financial needs, any current offers, educate you on lending and financial alternatives and, finally, helping you on selecting the perfect lender and term.
If you are looking for a Milton Mortgage contact our team today!