---
title: Fixed Rate vs Other Mortgages | BCCU
description: Understanding how Fixed Rate mortgages stack up against other mortgages can help save you a lot of money
---

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# [Fixed Rate vs Other Mortgages | BCCU](https://www.bccu.org/blog/fixed-rate-vs-other-mortgages)

 Written by [Admin](https://www.bccu.org/blog/author/admin) | Mar 13, 2017 4:00:00 AM

### When purchasing property or refinancing a home, a borrower should consider the various types of mortgages available to fit within their needs and their budget.  

Listed below are a few different types of mortgages that are available to help you find the best type of loan to best suit your needs. 

**Fixed Mortgage**  
 A condition associated with fixed mortgages involves a constant interest rate throughout the time period of the mortgage loan. With fixed mortgages, the amount of money a person pays in a given time frame is pre-determined. A fixed rate mortgage is feasible for people interested in adjusting the monthly debt installments to their budget.

- ***Advantage ***- The monthly installments remain the same, regardless of the prevailing interest rate and the borrower is protected from unexpected interest rate increases. 
- ***Disadvantage ***- A fixed rate mortgage can be more expensive as compared to an adjustable rate mortgage. If interest rates are higher, qualifying for a loan can be more difficult as the payments will be less affordable. Furthermore, if interest rates fall, those with a fixed rate mortgage would need to refinance to benefit from a lower rate.  
- ***An Important Consideration ***- A borrower may face penalties if they want to pay off the loan earlier than the predefined time period. Additionally, when selecting a mortgage loan make sure to consider all the factors as they will vary in terms of the different packages that are offered.

**Discount Mortgage**  
 The lender sets a Standard Variable Rate (SVR) independently and proposes certain discount offers for specific time frames; typically ranging from two to three years. The ratio between the discount and SVR proposed by a lender can be a bit trickier to handle in a discount mortgage.

- ***Advantage ***- Monthly paybacks are comparatively less and they can be even lower if the lender lowers the SVR.
- ***Disadvantage ***- The discount mortgage is a variable rate so your rates can go up and down over time.
- ***An Important Consideration ***- The borrower needs to consider their budget in a way that it becomes feasible to cope with an unexpected fluctuation in the SVR. Such fluctuations are common in the case of a discount mortgage.

**Offset Mortgage**  
 An off-set mortgage is set in conformity with the savings of the borrower. As a result, the borrower pays the debt for a lesser amount. For instance, if a person has a debt of $200,000 and savings of $50,000, then the debt will be paid for $150,000.

- ***Advantage ***- It facilitates the debtor as it saves them time and money. Also, the debtor is not liable to pay any interest on the savings that is offset for the mortgage.
- ***Disadvantage ***- The interest rate is higher as compared to fixed rate mortgages. Meaning, the borrower would need to set their budget accordingly.
- ***An Important Consideration ***- It is comparatively more convenient for people who fall within a higher tax bracket as well as those with a considerable savings because the interest rates are higher.

 

**Capped Rate Mortgages**  
 It is similar to the discount mortgage, except the lender cannot exceed SVR beyond a certain limit. 

- ***Advantage ***- The borrower can budget for the increase in the SVR, as the highest SVR is predicated.
- ***Disadvantage ***- The cap is set comparatively higher.
- ***An Important Consideration ***- Despite the SVR capping, the lender is free to change the rate anytime while staying within the cap limits.

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