How To Choose Between A Fixed Rate Mortgage And A Variable Rate Mortgage
Whether you are trying to mortgage your home or trying to buy a home you must know in the market today two common mortgages rates prevail. The two most common rates are known as a Fixed Rate Mortgage and the Variable Rate Mortgage.
As the name suggest, the fixed rate mortgage contracts you for specified interest rate over a specific period of time. This period of time is refereed to as a mortgage term. A mortgage can range anywhere from a six months loan to 30 years.
Though the variable rate mortgage may have payment terms that are fixed, the interest rates can change. The moves in the market prevail in determining interest rates. You technically pay a fixed payment every month. What the variable rate mortgage is does is distributes what you pay in interest and what goes towards your premium depending on the current interest rate. If the interest raises your payment toward the principle decreases and the payment toward the interest increase. The reverse is true if interest rates decrease.
Which type of mortgage is right for your depends on your ability to handle the interest...
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