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One problem that may rise when choosing variable rate mortgages is that since the payments are composed fully of interests, a variation of the interest rate affects the amount of the monthly installments significantly and thus, an increase on the interest rate can skyrocket the monthly payments leaving the borrower unable to afford them.
That’s the reason why, whenever possible, you should try to apply for a fixed rate interest only loan to know for sure that the interest rate will remain the same over the whole life of the loan. Thus, you will be able to avoid variations on your mortgage loan payments that could otherwise lead to defaulting on your loan.
Kirt Eure - Your Mortgage Coach
