First-Time Homebuyer – Know Your Interest Rates

When it comes to that first home, there are a few things that need to be considered – the down payment (which is a significant factor) and the type of interest rate you want.

A down payment can range from as low as 5% upwards to 20%. It’s important to consider though, just because you put down a higher down payment, it doesn’t always make things better. Imagine putting down a down payment of 20%, and then realizing you have spent all your savings – this is what we call “house poor.” You want to avoid this situation.

Now interest rates, there are two types that as potential homeowners you may encounter – fixed or variable.

What’s the difference between the two mortgage rates?

Fixed –

With a fixed mortgage rate, this means that that interest will remain the same and not change during the loan. For example, if the interest rate that a new homeowner is qualified for is 6%, whatever 6% is of the principal loan is what they would pay monthly.

Variable –

For a homeowner who is entering the market, one thing that they will likely focus on is the mortgage rates. Sometimes the market will find itself in a situation where the mortgage rate at the moment is at a highly competitive interest – the risk? This rate may not stay the same throughout the life of the loan, making it a variable mortgage rate.

Is one better than the other?

When it comes to determining whether or not to go with a fixed or variable, consider if whether or not financially you can afford when the rates go up. Some mortgage brokers may be able to facilitate an interest rate that combines both aspects of a fixed and variable, in that you can start off with a fixed rate, but at the end of a term, it can increase to reflect the influx in the rate.

Know what your budget is monthly. If you are a bit of a risk-taker, going with a variable mortgage rate may be ideal for you; however, if you prefer to know what your budget will look like down the road, fixed it is.

Categorised in: Buyers, Kamloops, Real Estate

This post was written by kamloopshomesearchcom