How to Compare Variable and Fixed Mortgage Loans

Fixed mortgage loans are mortgage loans with fixed interest rates. In other words, their interest rates remain the same until the loan is fully repaid. Variable mortgage loans, on the contrary, have variable interest rates, which may increase or decrease depending on market conditions. Both types have their positives and negatives. For best results, you will need to consider your needs and decide which loan is right for you.

Decoding Between Fixed and Variable Mortgage Loans

There are several different fixed and variable mortgage loans. Ideally, you want to find a loan with the lowest interest rates possible. However, you also want to pick a loan with interest rates that you will still be able to afford years down the line.

The fixed mortgage loans tend to have higher starting rates than variable mortgage loans. However, variable rates tend to fluctuate in reaction to the daily shifts in the stock market. If the economy is good, the rates will stay low, but if the economy is in trouble, the rates will rise. The fact that the rates change on a monthly basis helps to mitigate that, but the fact of the matter is that you can never be quite sure what your rates will be every month. With fixed mortgage loans, by contrast, you will have the security of knowing exactly what they will be.

Ultimately, you will have to consider your financial situation for the next few years and try to calculate just how much you can afford to spend on mortgage. If you can't afford to spend more then twice the value of the mortgages you're considering, you may be better off with a fixed mortgage loan. If you can afford to spend more than that, variable mortgage loans may work better.

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