Thursday, March 10, 2011

A Fixed Rate Mortgage and an Adjustable Rate Mortgage in Ottawa - A Simplified Version

If you are trying to secure a mortgage to buy a home in Ottawa, there are two types of mortgages you can choose from; a fixed-rate mortgage or an adjustable-rate mortgage. You may not be familiar with these mortgage terms at all, but you will find an easy explanation of both terms below. You can also call your Ottawa real estate agent who can explain to you more in-depth details so you can better understand the difference.

Fixed-rate mortgage

On average, the rate of interest for a fixed-rate mortgage is higher than it is for an adjustable rate mortgage. Due to likely hikes in the rates of interest over the period of the mortgage, credit companies in Ottawa need to make up for any losses that may occur if and when the rates of interest increase. For the majority of people buying a home in Ottawa, this mortgage provides peace of mind since you will not expect the monthly payments to increase for many years.

Adjustable-rate mortgage

This mortgage has a lower rate of interest than the fixed rate loan at the start of the loan term, but it has a repayment that is uncertain over time. When the rates of interest spike during the term of your loan, your monthly repayment rates will follow suit. This is quite risky for most people that are looking for a home in Ottawa. It is a gamble, but all in all it is a risk that many choose to take in order to get a cheaper interest rate for the first few years.

The interest rate difference will depend on the current rate of interest at the time you take out the loan. You should seek a qualified loan professional for solid advice about getting a fixed rate mortgage or an adjustable rate mortgage. They will be able to advise you accordingly, based on the present interest rates. There is no right or wrong kind of mortgage. It is more a matter of what you need, based on your current financial situation.

Buying a home in Ottawa is an exiting time. I can show you why the time is now to get a new home and answer questions you may have about both of these mortgage types.

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