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Difference Between Variable Rate Mortgage and Fixed Rate Mortgage

There are two primary types of mortgage to buy real estate in Ottawa: the Adjustable Rate Mortgages and Fixed Rate Mortgages. In different places, the different marketplace will give you the different varieties of these two types of mortgages. When you plan to shop for a Ottawa mortgage, the first thing that you will need to consider is to know or to determine the type of mortgages that is suitable for all your needs. If you don’t have any idea about these two types of loan mortgages, then keep on reading this article for this will give you many ideas that will help you to determine which type of mortgage type will suit for all your needs.

The Fixed Rate Mortgages

A fixed rate mortgage is a type of loan mortgage that will not change the charges of interest throughout your loan’s duration. Even though the price of the interest and the principal’s amount will always depend upon your payment every time, but the amount of your payment will not change. That will make the budgeting of Ottawa homeowners easier. One of the advantages that a fixed rate mortgage will give you is that this type of mortgage loan will protect you if the mortgage payment has an increase in its amount. This fixed rate mortgage is easier to know and understand rather than variable rate mortgage for this type of mortgage will depend upon the lender. The disadvantage of this fixed rate mortgage is that when there is an increase in the interest, so that is qualified for this kind of loan will be more difficult because of the lesser affordability of the payment.

Even though the rate of this kind of a fixed interest, the interest amount that you will need to pay will always depend on the term of the mortgage.

The Adjustable Rate Mortgage

In this second type of Ottawa mortgage loan, the adjustable rate mortgage’s interest amounts are not permanent unlike the first type of mortgage which is the fixed range mortgage. Below the market rate, you can see the first interest amount of the adjustable rate mortgage. This rate amount home mortgage will increase as time goes by. If the adjustable rate mortgage has a longer term than the fixed rate mortgage, then the rate of the interest of this adjustable rate mortgage will surpass the rate of the first type of mortgage.

The adjustable-rate mortgage has its allotted time where the interest amount will remain the same when the allotted time ends the amount of the interest will change. Its fixed rate period will depend particularly, for instance from one month up to 10 years, the shorter the time, the lower will be the amount of the interest but the longer the time, the interest rate amount will also increase.

The advantage of this adjustable Ottawa rate mortgage is that the interest rate amount of this loan type is lower than the fixed rate mortgage within 3 to 7 years. The disadvantage of this mortgage is that the monthly payment amount of your loan will have a frequent change throughout the loan’s life.