Applying for your first mortgage can be an extremely intimidating experience. In fact, the whole process of buying a home for the first time can seem very overwhelming due to the vast number of questions that you must ask yourself, the buyer, an agent and the bank. These are stresses that come up whether you are applying for a Toronto mortgage or for one in rural Ontario. One of the questions that must be answered is whether you would like a fixed or variable rate mortgage loan.

A fixed mortgage is a loan where the interest rates remain the same throughout the entire period of the mortgage. This means if you are looking at condos for sale in Toronto and want to pay a set price each month then a fixed mortgage is ideal. Each month you will make equal payments that are not effected by the fluctuating interest rates. If you are applying for your very first mortgage then this is an ideal set up for you, as you can budget in the fixed amount each month.

Variable mortgage loans are the opposite of fixed, however they also have their benefits. In this type of loan, the interest rate that you pay on the loan fluctuates with the prime rate. When the prime rate goes down then your spend less on cover the interest rate and more of your money goes towards paying principal. When the rate is up then you will pay more towards interest. For owners of homes, this can be a very stressful way to pay each month, because it is not always the same rate. If you are a frequent visitor to a Puerto Vallarta beachfront rental and each year the price of your rental time changes, this could be due to the fact that the owner is paying a variable rate on the mortgage and needs to ensure that month is fully paid for.

The advantage of a variable mortgage is that generally you are paying a lower interest rate, however it is possible that the rate will increase on a monthly basis. The benefit of a fixed rate is that it is a consistent and reliable amount that you must budget for. If you are moving into a larger city for the first time and want to start your first mortgage, everyone from Mississauga real estate agents, financers and local homeowners will suggest a fixed mortgage rate.

The disadvantage with the fixed rate is that if the prime rate drops significantly, then you may end up paying well over the necessary amount per month. In this case you can refinance your loan, however this is a very timely and costly process. The negative aspect of a variable loan is simply the uncertainty of what the monthly payments may be. Whether you are interested in a Toronto, Ottawa, Oakville or Sutton mortgage, you must consider which option best suits your financial situation.