A fixed-rate mortgage consists of an interest rate that is “frozen” until the loan renewal date. It is important to know and understand these small mechanics related to your mortgage. The advantage with a fixed mortgage rate is that you know exactly what is waiting for you in terms of mortgage payments. In addition, it allows you to know precisely the distribution of your payment between capital and interest and the amortization of your mortgage, that is to say the time you will repay it in full.
Disadvantages of the fixed mortgage rate
On the other hand, there are some disadvantages to opt for a fixed mortgage rate. As always, it is crucial to talk to a broker so you can balance the good and bad with your situation. In particular, it may prove to be higher than the variable rate when the rate fluctuation is favorable. It is therefore normal that this is an element that must be taken into consideration. Also, penalties may apply if you repay your fixed-rate loan more quickly, although there are clauses that allow you to do so too. The most important thing is always to learn about all the details surrounding the fixed mortgage rate so you never get hurt by your mortgage.
Who is the fixed mortgage rate for?
The fixed mortgage rate is particularly suitable for people who want to plan their expenses in the medium or long term. It’s a very effective way to have a view on medium-term or long-term spending. It is also suitable for people who would not tolerate an increase in rates over the term of their term, both financially and psychologically. So at the level of assured stability, this can be an interesting avenue. The fixed-rate thus makes it possible to avoid any worry in relation to the future evolution of the interest rates.
The person with your interest in this type of choice is your broker. He will be able to ask you the right questions that will enlighten you about the fixed rate. There are certainly advantages and disadvantages, but the best advantage is always to determine if it fits your reality.