Mortgages: Fixed vs Variable Home Loans

Fixed loan:

Loan for a specific time period at a fixed rate

Variable loan:

Loan with a rate that fluctuates base on terms selected by borrower at origination.

For first time home buyers or second home buyers we usually recommend getting a fixed rate loan verses a variable loan rate. A fixed rate will not only help you to avoid any future rate rises, but it will also provide you with some surety around your regular mortgage repayments. Keeping the payments fixed makes it possible for the buyer to be able to tackle that balance more effectively as well.

There is a variable piece to a fixed loan which is the escrow account. The escrow account is were the lender puts part of your payment to tipically pay home owners insurance and your property taxes. The portion that is allotted to your escrow account will change yearly between January and March when the lender reevaluates said escrow account. If it is short, you will need to pay the shortage and if it is over, you will receive a check in the mail. ( We will be posting a detailed article on Escrow Accounts in the near future).

Variable loans are offered usually to investors that want to receive a positive cash flow from the property or one that would like to purchase more properties in the future.

With this said, this is not a cookie cutter process and we recommend scheduling an appointment to speak with one of our loan officers in order to review your particular situation and help your obtain your loan.