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Variable rate mortgage vs fixed

Ever tried explaining the "Variable rate mortgage vs fixed rate mortgage" to a 12 year old?  Not that every pre teen asks, but when my friend's daughter asked me, I had to simplify my finance lingo and use basic english terms.

A fixed rate mortgage means the amount of money you  pay the bank each month stays the same.  A variable rate mortgage means the amount of money you  pay the bank each month changes.

'But why does it change each month?' she asked...

 

Darn. I was doing so well.

So, I decided to use an analogy for a  commodity she could relate to - iTunes!  I have no idea if iTune has fixed or variable rates, but who cares, she grasped the concept quite nicely.

If you decided to buy and download a song from iTunes every month becuase you purchased a 5 year membership of fixed price monthly tunes - you would pay the same amount for each song each month.  Ah ah...the Fixed Rate example.

But if you decided to buy a song each month from iTunes each month for 5 years but wanted to pay the advertised price, there will be some months the price could be higher and other months the price could be lower.  Ah ah...the Variable Rate example.

With that she was satisfied and became my first pre-teen student in the world or high finance.

If you want an adult explanation of fixed rate vs. variable rate mortgage financing please ask. I am way better at explaining to adults.