Fixed rate mortgages explained

Fixed rate mortgage is the type where you pay fixed amount of money for your monthly fee for the initial term.

08:11 27 July 2013

There are several types of mortgages available for people who would like to buy a house. One of the most popular is called fixed rate mortgage. This is the best option for those people who would like to lock in the interest rate for the initial term.

This simply means that for 2-10 years, your monthly mortgage payment will remain the same. At the end of the fixed rate period, the mortgage may be transferred to the lender’s variable rate. 

Just like with any other type of mortgage, fixed rate mortgage offers advantages to homebuyers. This offers security of knowing that your monthly payments will not change for the initial loan term. This gives you the power to budget for other household costs without thinking about monthly repayments suddenly shooting up.

For people who are on tight budget, this type of mortgage is highly recommended.

There’s also a disadvantage though. If you sign up with this type of mortgage, you may miss the opportunity to save money when the interest rates go down.