Fixed Interest Mortgage Rates

The safest way to take out a mortgage is through a fixed rate plan. This means that the interest rate you are agreeing upon today will remain the same for the entire duration of the loan. While this rate might be slightly higher than the variable rate, it is important to recognize that you can best plan around this rate over the long term. If you know that you’ll only need to pay $X every month for the next Y years, it is very easy to plan for your payments.

In fact, a fantastic way to manage your loan in this situation is to arrange for automatic monthly payments that come out of your paycheques every month. Through this sort of arrangement, you can pay down your debt over a fixed amount of time, and not need to worry about whether or not you will forget to make the payment, or worse yet, be tempted to spend your mortgage money before you make the payment.

Another reason why we’d want a fixed rate of interest is because we are never really sure (as borrowers at least) what the future interest rates will be. The economy is so volatile that interest rates could sky-rocket over the next few years, and we’d be stuck with mortgage rates that were above 10%. However, today we are seeing extremely low loan rates, and we would be fairly foolish to try and put in for a variable rate.

To put this into context, it would be extremely difficult for a bank to justify an interest rate of 0%, because they would not be making a profit off of the loan. The closer to 0% that a loan rate is, the more inclined we are to lock in that rate for a fixed term, because we know that the bank wants to increase that rate to make a greater profit.

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