So, you have finalized the property and are ready to apply for mortgage but got confused to choose a variable rate or fixed rate? This is one of the most common query that people worry about while applying for mortgage. Before we talk on merits of both, let’s define these terms.
Variable rate also known as floating rate is rate that changes over the period of time and doesn’t remain constant. On the other hand, fixed rate stays constant over the period of time it’s fixed for. Hence, unaffected by the change in interest rates in market. So, the question remains same that is which one to pick?
The answer depends upon the preference and condition of oneself. If you have a fixed income and no chances of receiving extra income such as bonus, you may opt for fixed rate because you will be less worried about the changes in market and certain of the amount that you will have to pay. However, if you are looking for flexibility then you may go for variable rate as it allows you make excess repayments without any penalties.