Fixed And Variable Rate Mortgages: Pros And Cons
| Money : Borrowing The difference between a fixed and variable rate mortgage could be a lot of money over the term of the loan, or could work out fairly level. The key pro of the fixed rate mortgage is predictability: because you know that the interest rate will never change, you can always plan the exact amount you need to budget each month to pay off the interest on the loan. With a variable rate however, you don't get that predictability, so if interest rates go up you could be hit by extra and unexpected payments. Of course the pro of variable rate is that you are market linked, so if the interest rate falls you will pay less, and you often start off paying less interest in the first couple of years; so if you expect your salary to go up in the first couple of years of the loan then this can work out well for you.
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