Fixed Rate Mortgage

A fixed mortgage is a mortgage with  an interest rate that stays unchanged regardless of market changes but only for a certain period of time, from 1 to 5 years or more. For the fixed rate mortgage, the interest rate should be a percentage lower than the standard variable rate. After the initial fixed interest rate interval has expired the interest rate reverts to the lender’s variable standard rate.

The advantage of this type of mortgage is that you know what you will be paying in interest and you can plan your finances accordingly. One other advantage is that, if the variable standard interest rate goes up you will have saved some money in interest. In addition to the rate discount, depending on the lender there may be some fee discounts as well.

The disadvantage of a fixed interest rates is that if the variable standard interest rate goes down you will not be able to take advantage of the reduction.