While mortgage loans granted today by banks are based on 20 years around 3.10% for fixed and 2.30% for variable rate loans, what to choose 1 ?
The rate is an important element in a mortgage.
It is essential to understand the mechanism of a fixed rate and variable rate loan offer, as well as their mutual advantages and disadvantages under pain of obtaining a result contrary to its objectives.
The fixed rate is an interest rate indexed on long-term rates, which by nature are higher than the revisable rates, which are fixed on short-term rate indices corresponding to the price at which the banks lend themselves money to short term.
Unlike a variable rate mortgage, the fixed rate is determined at the signing of the contract and does not change during the entire loan period, except renegotiation.
In the case of a rate-adjustable real estate loan, the borrower sees its rate change throughout the term of the credit. Consequently, this impacts either positively or negatively the amount of its monthly payments. These loans are often accompanied by rate hike controls to secure the floating rate credit in a monthly ceiling known in advance.
We tell you about other important items such as the rate as the ability to adjust the amount of your monthly payments over the life of the loan 2 ; to convert a variable rate into a fixed rate or to repay in advance.
Among the advantages and disadvantages:
1 . Give as an illustration only. This document does not constitute an offer or solicitation and should not be construed as investment advice. It does not replace a detailed study of the situation of a potential borrower to accompany it in its reflection and in the implementation of its real estate project.
2 . Borrowers should be aware of the risks associated with a home loan in order to know if such a transaction suits them and ensure that they understand the obligations related to this transaction, such as those related to the repayment of a mortgage and debt born of the granting of such a loan.