After deciding on your loan type, you need to decide what type of mortgage rate you will pay. There are two types of mortgage rates to choose from: a fixed-rate mortgage and a floating-rate mortgage. A fixed-rate mortgage is exactly what it sounds like. It is a mortgage that does not change for the entirety of the loan period.
This means that you will know exactly what you are paying for your mortgage every year with little to no change. If you are lucky enough to secure a low fixed interest rate on your mortgage, which is often difficult since fixed-rate loans can easily become expensive, then you will be able to have a steady interest rate and mortgage payment for the duration of your loan.
A floating-rate mortgage is more susceptible to the rise and fall of interest rates on the housing market, but it can be a good option for those who expect their wealth to increase over the years of their loan.
Floating-rate mortgages, such as adjustable-rate mortgages (ARM), allow you to qualify for a larger loan amount by offering steadily increasing rates as you pay back your home loan.
You will start with a low interest rate at the beginning of your loans, but that rate will increase over time.
If you think your salary will increase over time or you are expecting your financial situation to improve, this can be a good way to get a low initial mortgage rate.
However, be sure that you are prepared to pay the increasing mortgage rate over time, as this can often be unpredictable due to market fluctuations.
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