When you are ready to buy a home, financing is one of the biggest concerns. You choice of financing will impact your life for years to come so you want to make the best decision possible. There are some financing options to choose from including fixed and variable rate loans. When choosing a fixed vs. variable mortgage in Edmonton there are some things to consider. Each type of loan has both pros and cons that you need to know about when making your decision.
Choosing a Fixed vs. Variable Mortgage in Edmonton
Two of the most common loan options include fixed and variable rate mortgages. A fixed rate mortgage offers you the same interest rate over the entire length of the loan. Fixed rate loans may be any length but are often 15 or 30 years. Regardless of the current interest rate, the rate of your loan will remain the same.
A fixed rate mortgage is a stable choice because it gives you a guarantee that the loan payments will not change or fluctuate over time. This can be a benefit, especially if you are able to qualify for a low interest loan. You will know that the payments are calculated using the same interest rate over the life of the loan and your payments will not go up or down.
A variable rate mortgage is slightly different. It provides for changes to the interest rate when the current interest rate changes. The interest rate will be recalculated according to the terms of the loan. When a re-calculation is done it uses the current interest rates. Your monthly payments will change accordingly.
Considerations When Choosing a Home Loan
There are some pros and cons to a fixed vs. variable mortgage in Edmonton. A fixed rate mortgage has lower long-term risk associated with it and there will be no fluctuations over the life of the loan. However, you can usually expect to pay a higher interest rate with a fixed mortgage and any penalties that may be applied are usually higher.
A variable rate mortgage usually has a lower initial interest rate and lower associated penalties. It does come with a higher risk than a fixed rate mortgage. The most significant risk of a variable rate loan is higher interest rates. If the interest rates rise and continue to do so, your loan could end up being much more expensive in the long run.
In the end, the choice is up to you whether you choose a fixed vs. variable mortgage in Edmonton. It can be helpful to seek some financial advice and assistance before you make a loan decision. A knowledgeable expert will answer your questions and help you make a choice that works best for your current and future financial situation.
A mortgage loan is one of the most important financial decisions you can make so it is best to gather as much information as you can to help you decide how to proceed. Contact us today to learn more about mortgage options.Fixed Vs Variable Mortgage Edmonton