With all the financial decisions that need to be made when purchasing a home, choosing the options that make the best sense for you can seem overwhelming. Given the uncertainty of interest rates and the security of lenders, deciding what type of mortgage to choose and from whom to borrow can be a difficult and time-consuming task. One of the most important decisions is what type of mortgage to choose. The choice between a fixed rate and variable rate mortgage can be an intimidating task if you are not armed with the facts, so here are a few things to consider before making a decision.
What Is Your Current Financial Situation?
One of the most important considerations to take into account before choosing a fixed rate or variable rate mortgage is knowing your current, short-term, and long-term financial outlook. Historically, those who choose a variable rate mortgage end up on the winning end of the deal. Since rates fluctuate with the economy, and fixed rates are in most cases higher than variable rates (depending on when you took out your mortgage), the saving in the long term can be quite considerable. If you are in a current financial situation in which your budget cannot handle the potential ups and downs of a variable rate, and a regular monthly payment makes more sense, then a fixed rate is probably a better choice.
What Is Your Long-Term Financial Outlook?
Another decision to make when selecting a loan is the amortization period and the length of your current mortgage interest rate agreement. If your current financial outlook is very similar to your long-term financial outlook, then you may want to consider a longer term, variable rate loan. If, however, you are likely to have a considerable change in your income through expected promotion, retirement, or one income being lost, then choosing a shorter term, fixed rate may be the better choice.
Regardless of your financial situation, it is always important to get the advice of a qualified financial advisor, and ensure that you get your mortgage through an established and reputable lender.