If you currently have a variable rate mortgage and expect interest rates to rise, you may want to switch to a fixed rate mortgage. By locking in the interest rate you may have to pay higher monthly payments initially but should interest rates continue to rise, you will not have to worry about an increase in mortgage payments.

If you want to refinance your home mortgage then you can choose between a variable or fixed rate mortgage.

What Is A Fixed Rate Mortgage?

With a fixed rate mortgage your interest rate remains unchanged over a certain period. You are not affected by interest rate increases and your mortgage payment will not change over that period.

What Is A Variable Rate Mortgage?

If you start off from scratch then the variable rate option will always have a better interest rate linked to it than a fixed rate loan. During periods of interest rates declining you will benefit greatly from such an option.

Should interest rates rise above the initial fixed rate, you will be worse off with such a strategy.

Is Your Mortgage Causing Stress?

A lot of South Africans opted for the variable rate option when interest rates were on the way down, to take advantage of lower payments. However, lately, rates have gone up and some are starting to feel the effect on their budgets.

If you do not feel comfortable with the fluctuations of your mortgage payments, and would feel much better if your payments remained the same, then you could consider a fixed rate loan.

Should I Switch To A Variable Or Fixed Rate Mortgage?

You could use the length of time you plan on keeping the property as a guideline to make a decision. If you do not plan to stay in the home for long and you choose a fixed rate mortgage, with a higher interest rate that is usually associated with a fixed rate, it may be costing you money every month.

You should rather consider refinancing to a variable rate mortgage that may provide you with much lower payments. Even if the new variable rate mortgage rises at first, the starting rate may be low enough to offset any increased payment costs.

If you do plan staying in your home for a few years, now might be a great time to switch to the payment security of a fixed rate option.

For more information see the following money saving articles below
- Recognizing a Bad Mortgage Loan
- How to Afford a Mortgage Bond
- Debt-Free Living
- Are Debts Keeping You Up At Night?
- Good Debt vs Bad Debt
- Budgeting – It Has to be Done Otherwise You’re Sunk!

To apply for a loan you will have to fill out a short application form. You will then receive a FREE quote from well established, nationally recognized lenders. You do not need to decide now whether the loan is for you.

Just apply and compare the repayments to your current situation. There is no obligation on your part. If you decide that it is not for you, you simply do not have to accept the offer. You have nothing to lose and everything to gain.

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