Fixed Or Variable Rates: Which Is Right For You? - By: Eva Judge

Although you might go into buying a home with a pretty good idea about whether you're going to want a fixed rate mortgage or a variable rate mortgage, the fact remains that it is an important decision that can't be taken lightly. Researching the merits and drawbacks of each type can help you make a better, more effective decision.

Fixed Rate Mortgages -

As most mortgage brokers Brisbane will attest, fixed rate mortgages are generally the most appealing option to the broadest array of prospective homeowners. The biggest reason for this, of course, is the fact that they come with an easy-to-budget, unchanging monthly mortgage payment. Since the interest rate on such a loan doesn't fluctuate, homeowners can plan ahead with more accuracy. Also, should rates increase a fixed rate mortgage will protect you. On the other hand, if rates dip you will be stuck paying in at a higher rate. Often, fixed rates only apply for a certain period of time; talk to your broker to discuss the merits of these loans.

Variable Rate Mortgages -

Market forces and the Reserve Bank of Australia each month determine the interest rate for variable mortgages. Therefore, the rate can fluctuate dramatically and in ways that are both positive and negative in terms of your monthly mortgage payment. Some people prefer variable rate mortgages because they are more flexible when it comes to making additional repayments. On the other hand, if rates rise a lot many people find themselves in dire straits in terms of affording their monthly payment. Of course, if rates fall then you enjoy lower payments.

Discuss Your Options -

Many different things will determine whether or not you're best suited for a variable rate mortgage or for a fixed rate mortgage. People with a lot of "wiggle room" financially - i.e., those who don't need to adhere to an extremely strict budget - often do much better with variable rate loans. For those who must rely on consistent monthly repayments are generally advised to take up the fixed mortgage option. Ultimately, the decision will be entirely up to you. For best results, discuss the pros and cons of both loans with your mortgage broker, who will look at your overall financial picture and advise you on the best course of action.

About the Author

Mortgage brokers Brisbane are routinely questioned by prospective homeowners about the pluses and minuses of fixed rate versus variable rate mortgages. Any Brisbane mortgage broker with a decent amount of experience such as Brisbane Financial Services will agree, though, that what's right for one person may not be right for the next.

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