Fixed or Variable Mortgage Rates: Which is Better for You?
When filling out a loan application, you are faced with a multitude of decisions. But one that could be most crucial to the success of your home loan is whether you pursue a fixed or a variable mortgage rate. Should you wait to see if rates become lower or should you avoid the risk and take a fixed mortgage rate now?
With a fixed mortgage rate, you transfer the risk to your lender. That way, if the rate goes up, you’re still guaranteed the lower interest rate that you locked in. However, if rates decrease, your lender will benefit as you’ll be stuck with the higher interest rate.
This is why some homebuyers tend to go with variable mortgage rates, in the hopes that rates will decrease more. This helps them save more on their home loan. However―opposite of locking your rate―if rates increase, you may find yourself with a higher interest rate than you intended.
Interest rates are subjected to risk due to certain market fluctuations, and nobody is able to predict the exact direction of rates. When deciding whether you should procure a fixed or variable mortgage rate, it’s a matter of deciding how much risk you’re willing to take on. Your home loan expert will have a better idea of where rates are heading and should be able to guide you through your decision.
If you had to choose today, what would you decide on: a fixed or variable mortgage rate?