Choice of interest rate and mortgage can be difficult. You have to take two important decisions when choosing the interest rate: if you choose a fixed or variable rate and if the loan is short term or long term. Not an easy decision … The choice you make will influence your life in years to come … Indeed one option that you choose will influence how you manage your monthly or yearly budget.
Fixed Interest: Definition
A fixed rate loan allows you to pay interest at a fixed rate, despite fluctuations of the National Bank. In other words, your monthly rates will remain the same for a period of time determined by you and the lender. Once this period ends, your credit may be transferred to a standard variable rate of interest.
Advantages and disadvantages
The main advantage of loans with fixed interest rate is the level of security they provide. However, a fixed interest rate is advantageous in certain situations. If the base rate of interest fluctuates unpredictably, then a fixed rate ensure what you can do with the budget you have.
But if the base rate of interest remains far lower than your fixed rate then you risk losing a lot of money if you do not reach any agreement with creditors.
Also, there may be a penalty that must be paid because you decided to pay in advance before the closing date. If you do not pay the penalty it means that you will be linked to mortgages in the coming years, even if the period for payment of rates is over.
Fixed interest is an advantage for short-term loans, as long-term interest rates tended to decrease.
Variable Interest: Definition
Variable interest rate means that it change regularly, depending on certain factors. Variable interest rate may be classified as explicit or inexplicit manner of its variation.
An explicit change requires a model of adjustment for interest . An inexplicit model involves an adjustment of the financial-banking market fluctuations and an internal decision of the bank.

Variable Interest: advantages and disadvantages
If you can afford to pay more when interest rates rise, then this is right. Variable interest requires, necessarily, over a year will double or that binding will increase. If the variable interest is calculated on a specified reference index and a fixed margin required by the bank, you don’t have why to worry because you will not encounter unpleasant surprises that the credit interest rate to become higher than the market supply. Loans with variable interest given the opportunity to benefit of a cheap financing, but there is also a risk that if the interest rates rise, customers are forced to pay higher rates on the loan. Variable interest rate is very sensitive to financial market trends and shows instability for such people who hate surprises, no matter how insignificant it is.