When it comes to home mortgages, one of the most important decisions you need to make is whether to opt for a fixed-rate or variable-rate loan. The difference between the two loan types can be confusing, but understanding them is critical to make the right decision.

Fixed-rate mortgages are loans with an interest rate that remains the same throughout the life of the loan. This means that your monthly payments will stay the same, even if the market rate of interest changes. The most common type of fixed-rate mortgage is a 30-year loan, although 15-year mortgages are becoming increasingly popular. With a fixed-rate mortgage, you’ll have the security of knowing that your payments won’t change and you’ll have the ability to plan your budget accordingly.

Variable-rate mortgages, also known as adjustable-rate mortgages, are loans with an interest rate that can change over time. The rate is typically tied to an index, like the LIBOR rate, and will fluctuate depending on the index. With a variable-rate mortgage, your monthly payments can go up or down depending on the market rate of interest. The benefit of a variable-rate mortgage is that you may be able to get a lower initial interest rate than you would get with a fixed-rate loan.

When deciding between a fixed-rate and variable-rate mortgage, you should consider your financial situation and goals. If you plan to stay in your home for a long time and don’t want to worry about fluctuating payments, a fixed-rate mortgage may be the best choice for you. However, if you plan to move in a few years and think you may be able to benefit from a lower interest rate, a variable-rate mortgage may be a better option.

Ultimately, the decision between a fixed-rate and variable-rate mortgage will depend on your individual needs and financial situation. It’s important to understand the differences between the two loan types and to speak with a financial advisor or lender to help you make the right choice.