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Short Term or Long Term?  Fixed or Variable?

Choosing between a short or long term and fixed rate or variable rate depends on:

  • The level of interest rate risk you can take

  • Your flexibility

  • The level of security you need.

Generally, you will receive a lower interest rate with a shorter term (i.e. 1 year) and a higher interest rates with a longer term (i.e. 5 year).

Consider a short term mortgage when:

  • You are willing to follow interest rates closely and risk a higher rate when your term is up for renewal

  • You think the current interest rate is high and expect interest rates to fall in the short term.

Consider a long term mortgage when:

  • You prefer stability so that you are guaranteed the same payments for a longer duration

  • You think interest rates are likely to go up during your mortgage term.

In addition to choosing the length of your mortgage term, your mortgage interest rate can be fixed or variable.  Some thoughts below on deciding which will be right for you:

Fixed Rate

A fixed rate is a guaranteed rate for the length of your mortgage term.

Consider a fixed rate mortgage when:

  • You prefer stability so that you are guaranteed the same payments

  • You have a tight monthly budget

Variable Rate

A variable rate fluctuates with the market prime interest rate, but carries a much lower penalty should you ever need to break the mortgage (life happens!).

Consider a variable rate mortgage when:

  • You can tolerate interest rate fluctuations in order to take advantage of possible lower interest rates and lower penalty risk

  • You are a seasoned home buyer

  • You have job stability.

Buying a home is one of the biggest financial decisions you will make. It's important that you are making an educated decision with someone looking out for your best interest.Call Dara today to start the process!

Short Term or Long Term?  Fixed or Variable?: FAQ
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