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Factors to Consider before Choosing Mortgage

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Obtaining mortgage is one of the most crucial and biggest decisions that you have to make. For this situation, it is very important that you consider certain factors before deciding to choose mortgage. There are two types of mortgage rates where you can choose from, its either you go for variable of you choose the fixed rates. These two rates are present on the three types of mortgages, closed, open and variable. So what are the factors that should be taken into account?

 

  • Fixed Rates

The mortgage that contains fixed rates is free from any fluctuation or change on the paid amount. It will not experience ceria changes towards principal and interest by the time the mortgage term is locked. Fixed rates offer stability and consistency to the debtor or borrower. With fixed rate, budgeting is now at ease.

 

  • Variable Rates

If linked with present prime rate (the one that is experiencing changes and fluctuation), the variable rates might decrease or increase during the mortgage term. Your lender should give you discount rate or premium rate. The premium rate is the prime added by the set amount while discount is prime deducted by the set amount. Like for example, the present prime rate would be 3%. If your mortgagee has provided you with 0.40% discount rate, you will receive 2.6 variable rates which might be lower compared to your recent fixed rate. Since the prime rate is fluctuating, the borrower should be comfortable in taking the risk.

 

These two factors should be considered if you are going to choose mortgage. These factors will be very helpful on your part.

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