The difference between fixed and adjustable rate mortgages
There are many different types of mortgages around for those wishing to buy property these days. Two of the most popular types of mortgage are the adjustable rate and the fixed rate. Working out which of these two mortgages would be best for will depend upon your circumstances and your budget, and you should weigh up the pros and cons of each before deciding which to go for.
Adjustable rate mortgages are set at a lower rate of interest than fixed rate ones. However, the nature of this type of mortgage means that your interest could go up or down at any time, so your monthly payments can change often. This can make it difficult to budget, and of course there is always that small risk that the interest rates may rise to a level at which you cannot afford the monthly repayment any longer.
Fixed rate mortgages are set at slightly higher rates of interest than adjustable mortgages, so you will be making higher monthly payments from the start. However, if the base rate of interest rises, you will not have to worry about any change in your payment, as your rate will be fixed. On the downside, if the base interest rate falls, your fixed rate mortgage will still remain static, so you won’t benefit from cuts in interest rate either.
If you can afford a little leeway with your monthly payments, the adjustable mortgages may suit you, as you will benefit from a lower starting interest rate and could benefit from any further interest rate cuts. However, if you prefer peace of mind and want to know exactly what your outgoings are each month you may prefer to go for a fixed rate.
12:41 AM in Mortgages
