Fixed vs Variable Mortgages

Today we're going to talk about the difference between a fixed and a variable rate mortgage!

A fixed rate mortgage is a mortgage product that has a fixed interest rate and payment, which will not change for the life of your loan. Your payment and the interest rate stays exactly the same, and you can budget for it for the whole amount of your term.

A variable rate mortgage, on the other hand, is a mortgage product that has a variable interest rate, which means that if a lender makes changes to their prime lending rate, your interest rate will change as well, either up or down.

There are two types of variable rate mortgages. The first type is the most common, and this although it's commonly known as a variable rate mortgage, it's actually called an adjustable rate mortgage. This mortgage product has a variable interest rate and a variable payment, which means that if a lender makes changes to their lending crime rate, then your interest rate will change and your payment will also change along with it.

The second type of variable rate mortgage is actually called a variable rate mortgage, and this product has a variable interest rate so that whenever there are changes to a lender's prime lending rate, your rate will change along with it as well. The difference here is that your payment is fixed for the term of your loan. So what happens is if the interest rate increases as an example, and your payment doesn't change the amount of interest that you pay within that payment will increase. And the amount of principal that you're paying will actually decrease. So you're paying less of your mortgage down over time.

As always, reach out to our team if you have any more questions.