An overview of the variable rate mortgage

If you want to get a foot on to the property ladder you are going to need a mortgage and a variable rate mortgage is ideal for this.
If you want to get a foot on to the property ladder you are going to need a mortgage and a variable rate mortgage is ideal for this.

There are effectively two different types of mortgage products on the market. The first is the fixed rate mortgage and the second is the variable rate mortgage.

So, a variable rate mortgage holder will pay more when the overall interest rate increases, but will benefit when the overall base rate falls. Another big advantage of the variable rate mortgage is the interest rate is often less than the ones offered with fixed rate mortgage deals, which makes them cheaper.

The biggest disadvantage with a variable rate mortgage is the fact the interest rate can actually go up, as well as down. However there are other disadvantages to consider before taking out a variable rate mortgage. Since a variable rate mortgage can fluctuate it can be difficult budgeting when you have a variable rate mortgage. Since you can’t be sure what the monthly interest charge is going to be, nor can you accurately predict it, how do you provide for it in your budget?

The other disadvantage with variable rate mortgages is the availability of them. Variable rate mortgages are generally cheaper than fixed rate mortgages, so to qualify for one you will need to have some equity in your property and have a low loan to value ratio. Some people, especially first time buyers, won’t have a low loan to value ratio and will not qualify for a variable rate mortgage. The other problem with variable rate mortgages is they are often withdrawn when the base rate is low. The base rate is the lowest it has been for years and as such, many variable rate mortgage products have been withdrawn. That said, there are still some good variable rate mortgages in the market, the trouble is finding them.

If you are fortunate enough to qualify for either a fixed rate mortgage or a variable rate mortgage the variable rate mortgage is definitely the deal to go for.

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