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Fixed vs Variable Mortgage Rates: Which Is Right for You?
December 11, 2024 | Posted by: Dominion Lending Centres National Advantage Mortgages
Choosing between Fixed vs Variable Mortgage Rates is one of the biggest decisions you’ll make when securing a home loan. Each option has its own benefits and drawbacks, and understanding how they affect your payments is key to making the right choice.
Let’s break down what you need to know to decide which works best for you.
What Are Fixed Mortgage Rates?
Fixed mortgage rates have an interest rate that stays the same for the entire loan term. This keeps your monthly payments consistent, making it easier to plan your budget without worrying about changes.
However, fixed rates usually start higher than variable rates. While you may pay more initially, the benefit is knowing your payments won’t increase if market rates go up. This can be helpful for anyone who values stability in their finances.
What Are Variable Mortgage Rates?
Variable mortgage rates, on the other hand, fluctuate based on the lender’s prime rate, which moves with market conditions. When rates drop, you can enjoy lower monthly payments. But if rates rise, your payments will increase.
Variable rates typically start lower than fixed rates, making them appealing if you’re comfortable with some risk and want to save money upfront. However, this option can make budgeting trickier, especially if market conditions change unexpectedly.
Fixed vs Variable Mortgage Rates: Key Differences
- Stability vs Flexibility: Fixed rates give you stability, while variable rates offer flexibility and the chance to benefit from market dips.
- Upfront Costs: Fixed rates may start higher but protect you from increases. Variable rates usually start lower, but there’s no guarantee they’ll stay that way.
- Budgeting: If you value predictable payments, fixed rates are a better choice. If you can manage potential payment changes, variable rates might work for you.
How to Decide Which Rate Is Right for You
- Your Risk Tolerance: If you’re risk-averse and prefer knowing exactly what you’ll pay a fixed rate is the safer option. But if you’re comfortable with some fluctuation and want the potential to save, a variable rate could be worth it.
- Current Market Conditions: When rates are low, locking in a fixed rate might be a smart move. If rates are expected to drop or remain stable, a variable rate could save you money.
- Loan Term: For shorter loan terms, a variable rate can often result in savings. For longer terms, a fixed rate provides more stability over time.
- Use a Mortgage Calculator: A Mortgage Calculator is a handy tool to compare how fixed and variable rates impact your monthly payments. Input different scenarios to see which option fits your budget and financial goals better.
Make the Right Choice for Your Mortgage
Deciding between Fixed vs Variable Mortgage Rates doesn’t have to be overwhelming. Take the time to assess your financial goals, risk tolerance, and market conditions. With the right guidance, you can make a choice that works for you today and in the future.
At Dominion Lending Centres National Advantage Mortgages, we’re here to help you navigate the options and secure the Best Mortgage Rates for your needs. Use our Mortgage Calculator to get started, and let’s find the right mortgage solution for you!