What is the difference between Flat Rate vs. Reducing Rate

When evaluating mortgage options, it's essential to understand flat rate vs reducing rate interest calculations.

• Flat Rate: Calculated on the original loan amount for the entire duration, making interest payments predictable but not accounting for a decreasing loan balance.
• Reducing Rate: Calculated on the outstanding balance after each payment, which decreases over time, generally resulting in lower overall interest costs. Choosing between these rates affects the total interest paid throughout the loan term.