Fixed vs Variable Interest Rate: What's the Difference?
With a variable rate, also called adjustable, the rate can go up or down while you repay.
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1.What is a fixed interest rate?
With a variable rate, also called adjustable, the rate can go up or down while you repay.
2.A variable rate is usually built from which two parts?
If the index rises one point, your rate rises one point, while the margin stays put.
3.Who carries the risk that rates rise under a fixed rate?
With a variable rate that risk moves to you: if rates rise, your payment rises; if they fall, you pay less.
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Sources (2)
- CFPB: What is the difference between a fixed-rate and adjustable-rate mortgage (ARM)?
- Eigene Berechnung (synthetische Rechenbeispiele, Python)
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