If you’re in the market for a mortgage, it can be difficult finding a mortgage that fits your budget and understanding the different options. Below is a quick rundown on the differences between fixed-rate mortgages and variable mortgages and how you can select the best one for you.
What’s The Difference?
Before we tackle which kind of mortgage style is best for your needs, it’s important that we outline what exactly a fixed-term and variable mortgage is.
A fixed-term mortgage is when you agree to borrow money from a lender and repay it over the period with an interest rate that never changes. This means that if your interest rate starts is 4%, it will stay at 4% for the entire lifetime of the mortgage.
On the other hand, a variable mortgage is when you borrow money from a lander, but your interest rate can fluctuate depending on shifts in the economy. This can result in a mortgage starting 4%, but due to the banks later lowering their interest rates to 3%, the existing mortgage rate will go down to 3% as well.
What is the State of the Market?
During a time when the economy is doing well and plenty of people are opening bank accounts, lenders will often lower their rates due to the great amount of credit available to them. When the rate of people opening accounts decreases, lenders will be forced to raise interest rates to make up for the loss of credit.
If you’re considering applying for a mortgage and banks are only beginning to lower their rates, getting a variable mortgage can potentially provide you with interest savings for the first few years.
What Are Your Goals?
Everyone has different financial goals, and whether you are looking to potentially save money in your mortgage or have a steady, reliable mortgage is totally up to you.
Fixed-rate mortgages are an excellent option if you value stability and are looking at exploring other financial opportunities alongside your mortgage journey. While variable rates are ideal for those who follow lending trends and work to lower their interest payments.
Whether you’re looking for stability or opportunity, I can help you achieve your goals and find the mortgage that works for you. Give me a call today or visit my website to see how I’ve helped many Saskatoon families and can help yours too.