Should You Pick a Fixed-Rate Loan or a Variable-Rate Loan?
Are you on the hunt for a loan?
Well, one thing you must always consider before picking one is the type of rate it has. Some may have fixed rates, while others may offer variable rates.
What are they, and which one is better for you? Well, that answer is a little tough to answer, simply because one may work better for one person but not the other. That said, to help you understand which type of loan will be better for you, we'll discuss what fixed-rate loans and variable-rate loans are today:
What Are Fixed-Rate Loans?
A fixed-rate loan is a loan in which the interest rate stays the same for the entire term of the loan. That means your monthly mortgage payment will stay the same, even if interest rates rise.
What Are Variable-Rate Loans?
A variable-rate loan is a type of loan where the interest rate can fluctuate over time. This means that your monthly payments could go up or down depending on market conditions.
What Are the Pros and Cons of Fixed-Rate and Variable-Rate Loans?
When you take out a loan, you typically have the option of choosing between a fixed-rate and variable-rate loan. Fixed-rate loans offer stability because the interest rate will never change within your 5-year term, no matter what happens in the market. This can give you peace of mind, knowing that your loan payments will always be the same.
On the other hand, variable-rate loans may start out with a lower interest rate, but that rate can change over time. This means that your loan payments could go up or down, depending on market conditions. If you're comfortable with a little bit of uncertainty and are willing to take on the risk of higher payments down the road, a variable-rate loan could save you money in the long run. When variable rates are volatile, there is something called a "Variable-capped mortgage" which lets you keep monthly mortgage payments even if rates go up.
Of course, there are pros and cons to both types of loans, and the best option for you will ultimately depend on your individual circumstances. Be sure to speak with a financial advisor to get all the facts before making a decision.
Which Loan Type Should I Pick?
So, which type of loan is right for you? It depends on your personal circumstances and financial goals. If you want the security of knowing that your repayments will never change, then a fixed-rate loan may be the best option. However, if you're looking to keep your repayments low in the short term, then a variable rate loan could be a better choice. Ultimately, it's important to compare both types of loans before making a decision.
THE BOTTOM LINE
All in all, both loan options are great in ensuring you get the money you need to finance whatever it is you need to finance. That said, if you are still unsure as to which type of loan you can pick, we once again advise you to find a financial expert to assist you in the decision-making. They can help you gather all the facts about the situation and come up with a strategy you can follow to ensure you get the most amount of money you need while still minimizing any possible losses or risks along the way!
Level Up Mortgages makes it easier for new buyers, newcomers, and even the self-employed to find the funding they need. If you are looking for private lending in Canada, get in touch with us today!
Do you want to learn more about mortgage financing in Canada? Level Up Mortgages supports homebuyers and homeowners in attaining success in their mortgage journey with mortgage strategy, digital mortgage education, and introductions to all the other experts you need to succeed in home buying and your personal finance. To assist homebuyers and homeowners in purchasing or refinancing new homes, we work with premier banks and best-rate mortgage lenders in British Columbia and Ontario. Get in touch with us today!