How to Establish If a Fixed or Variable Mortgage is Right For You
Usually, people decide to use fixed rate mortgages. This is mainly due to the fact that this type of mortgage stays the same over the entire life of the loan. Many people believe fixed rate mortgages are great because the stay stable over the entire life of the loan. Variable rate mortgages are different. They start with rates that are normally lower than fixed mortgages. However, they eventually go up or go down depending on a specific index. There is no doubt that variable rate mortgages can potentially save you a lot of money.
Advantages to Fixed Rate Mortgages
The main advantages to these types of mortgages include the fact that they are extremely simple and extremely stable. The terms to these types of mortgages are easier to understand than other types of mortgages. This type of mortgage typically has the same general terms over the life of the loan. Other types of loans normally have many rules and factors that determine how a specific interest rate is set.
These types of mortgages are not sensitive to specific real estate markets. This usually means that buyers have the freedom to budget several years ahead of time without having to deal with surprises that are hard to deal with.
If real estate rates skyrocket in the next twenty years or so, those with this type of mortgage do not need to worry about anything. If real estate conditions change drastically, those with these types of mortgages normally have the freedom to refinance the loan in order to obtain lower interest rates.
Advantages to Variable Rate Mortgages
The main advantage to these types of mortgages is the fact that they commonly have lower costs to begin with. For example, the interest rates to this type of home loan could potentially be an entire point lower than the mortgages that stay at the same rate for the life of the loan. In addition, many different lenders feature introductory interest rates that make things even lower than the original loan. This can allow men and women who are looking for a loan to purchase a larger home that they normally could not afford with a home loan that features higher interest rates.
These types of mortgages are also better when the real estate market features interest rate trends that are lower than the average interest rate. This means that people who take advantage of this type of loan can enjoy lower interest rates. In addition, when the market gets lower in the future, people who have this type of loan do not need to worry about refinancing it in order to receive lower interest rates. This is because the interest rate and the monthly payment for this type of loan changes automatically whenever the real estate market changes. This is a great loan for buyers who do not plan to live in their new home for very long. It is very unlikely for the real estate market to rise sharply in three to seven years after the loan has been taken out.
If you are in the Toronto real estate market shopping for a new home, it is wise to talk with a Toronto Mortgage Specialist about getting a mortgage pre-approval. A pre-approval provided by a skilled Mortgage Specialist will guarantee the rates on fixed term mortgages for up to 120 days. Not only will you know how much you can really afford in the Toronto rea estate market, but you’ll have a guarantee that if the rates increase in the next 120 days their rate will not. Call me for great mortgage specialist referral in the Toronto market now!