A fixed interest rate is one that stays static through the duration of the mortgage. In other words, if the interest rate is 7% at the onset of the loan it will stay 7% at the end of the loan. A variable interest rate will vary depending upon market conditions. As such, this is a gamble that is designed to “beat the bank”. In other words, you may be able to get the interest rate at 5% as opposed to the fixed rate of 7%. However, there is also the risk of the interest rate hitting 12% and turning into a disastrous gamble. Then again, if the variable rate spirals out of control you may have the option of refinancing; but this will be dependent upon your personal situation.

Ultimately, the type of interest rate that you select will be based upon your own personal willingness towards risk. For some, a low risk conservative approach is preferred. For others, a more volatile approach may have appeal. Again, the proper option rests ultimately with personal goals and comfort levels.