Choosing between a fixed or variable-rate mortgage is one of the critical decisions you need to make when applying for a loan. Although both rate types have their own advantages, your specific financial needs and situation determine which choice is best for you.
A fixed-rate mortgage has the same interest rate throughout the entirety of the loan's term. Although the amount allocated for the principal and interest might vary, your total monthly payment remains the same, making budgeting easier.
A fixed-rate mortgage might give you comfort and stability when interest rates increase. However, it won't let you take advantage of any interest rate reductions that occur during your loan term.
A variable-rate mortgage starts off with a fixed interest rate for a certain period. But when that period expires, the interest rate fluctuates depending on the current market conditions.
If the interest rate increases, more of your monthly payment will go to the interest and less toward paying down the principal. But if the interest rate decreases, more of your monthly payment will go to paying down the principal and less to the interest, making you pay off your mortgage faster. This might be an exciting advantage of the variable rate, but keep in mind that interest rates are difficult to predict.
Ebenezer Mortgage Solutions can help explore all your mortgage options and answer any questions you have. Call us today at (813) 284-4027.