Most consumers these days are following a budget. When it comes to the cost of living, a budget has become a vital necessity in terms of keeping on top of your finances. It’s easy to spend money carelessly and impulsively and then look back at the month that has just passed by and wonder where all of the money went. There aren’t too many people around that can keep track of the small spending and be able to account for their money without having any records to refer back to.
With a fixed rate mortgage, you know exactly how much your mortgage payment will be month after month, and year after year. There are no hidden surprises involved with a fixed rate mortage and you can always count on paying the set amount until the term of your mortgage is over. If you’re the type of person that tries to follow a monthly budget and want more security in your debt load for the future, a fixed rate home loan is usually your best choice.
Let’s say that you have signed the papers for a new condo and have to meet a $1,200 mortgage payment on the first day of the month. You’ll know that in 10 years this mortgage payment will be the same. Now let’s compare that to somebody that is renting an apartment for $1,200 per month and has just signed a 1 year lease. He has the security of knowing that his rent payment will be $1,200 monthly for the next year. In 10 years, however, he may be paying $1,500 per month to rent the same apartment. It all depends on the rental market here in Calgary during the upcoming years.
If you choose a mortgage with a variable rate, you won’t have the same security built into your mortgage as you would have with a fixed rate loan. Your mortage payment will depend on changes in future interest rates. For people that rely on security when it comes to their finances, the fixed rate mortgage is usually the best option.