What is the difference between fixed and variable rates?

Fixed and variable rates are two common types of interest rates associated with home loans and financing options. A fixed rate means that the interest rate remains constant throughout the entire term of the loan. This provides borrowers with predictability in their monthly payments, making it easier to budget over time. If a borrower locks in a fixed rate, they will always know how much they will pay each month, regardless of fluctuations in the market or economic conditions. This can be reassuring for many individuals who prefer stability in their financial planning. On the other hand, a variable rate, also known as an adjustable or floating rate, can change at specified intervals throughout the loan term. Typically, the interest rate is linked to an underlying benchmark interest rate, which may rise or fall depending on market conditions. This means that monthly payments could increase or decrease over time. While variable rates often start lower than fixed rates, they carry the risk of rising interest rates, which could lead to higher payments in the future. Borrowers who opt for fixed rates may find comfort in their predictability, while those who choose variable rates may seek the potential financial benefit of lower initial payments, provided they are prepared for possible future changes. When considering which option is suitable, it is essential for borrowers to evaluate their financial situation, risk tolerance, and long-term plans. For more specific details or assistance regarding fixed and variable rates in the context of Home Capital Group offerings, individuals may wish to consult the current web page for additional information and resources.