“What interest rate should I choose?”
Lots of people get stuck on rates. 4.75% or 4.99%. One year or two years. The choice looks tricky, but there’s a better way to look at it.
The real question is: which choice helps you pay off the loan faster?
When you pay extra, that money goes straight to the loan itself. That part is gone forever. You never pay interest on it again.
Why?
Interest is charged on what you still owe, not on what you have already paid back.
This is why extra payments are so powerful. Each dollar you knock off the loan lowers the base amount that interest gets added to. Over the years, the savings pile up.
That is why paying off the loan itself matters more than finding the “perfect” rate.
Short vs long
Shorter terms give you more chances to make lump-sum payments when the term ends. If you know extra money is coming, like a bonus or savings, a short term makes it easier to throw that money at the loan.
Longer terms lock you in for more time. That gives you certainty, but also fewer chances to pay in lump-sums without penalties.
So the trade-off is simple. Short terms give you flexibility to pay more. Long terms give you peace of mind, but less room to attack the principal.
Supporting options
Choosing a rate and term is the main decision. But how you structure the loan can also make a difference. These options are less about chasing the lowest rate and more about giving yourself ways to pay extra when you are ready.
Splitting: Divide your loan into different terms. One part can be short for flexibility, the other longer for certainty. This way you are not locked into a single path.
Floating: Keep a small piece floating if you expect to pay it off during the year. Floating rates cost more, but they let you make unlimited extra payments without penalty.
Revolving credit: Works like an overdraft linked to your account. Every dollar sitting in there reduces your interest. It suits people who manage money tightly, but for many, a mix of fixed and floating is simpler.
Something to think about
If you are tossing up between two rates, here is one approach. Pick the lower one, but keep paying as if you had taken the higher one.
For example, if the 1-year rate is 4.75% and the 2-year rate is 4.99%, choose the 4.75% but set your repayments at the 4.99% level. The difference goes straight toward your loan instead of interest.
It is a simple way to turn rate savings into faster debt repayment. This is an example of how some people think about rates, not advice for your situation.
The big picture
Rates will always change. Banks will always compete. What matters more is how you use the rate you choose.
The best rate is the one that makes it easier to pay off more of the loan itself. Every dollar you clear is a dollar the bank can never charge you on again.
That is how mortgage rates work for you, the Maverick way.