A Fixed Interest Rate Mortgage Makes Budgeting Easy
If you like to keep a close eye on your budget, one of the most popular types of loans you can get to pay for your home is a fixed interest rate mortgage. The advantage of a fixed interest rate mortgage is that you locked into one interest rate regardless of the market fluctuations by your broker that you will continue to pay throughout the course of your mortgage period. Many people take this option because they like that after one calculation they will know what they owe each month and can budget accordingly for it. One of the downsides of a fixed interest rate mortgage is that your payments do remain exactly the same which makes it a poor option for people who may plan on purchasing a home that is outside their means. This is because an adjustable mortgage loan allows for you to make lower payments at first and grow into your home as your income grows, however a fixed interest rate mortgage assumes you are able to make every payment at the rate your loan officer presents to you from the beginning to the end of your loan period. Thus, even though fixed interest rate mortgage loans make up over 80% of equity market, you will still have to pay more upfront for the first few payments than if you had a variable mortgage. You also have to account for the fact that there is less flexibility in a fixed interest rate mortgage than in an adjustable mortgage so if you have to make adjustments down the road because of an economic change it will be harder to do so. Also, the interest rate that a broker offers you on a fixed interest rate mortgage is typically higher than an adjustable mortgage rate since the loan officer knows they cannot increase the interest with the market as it changes, so you are a higher perceived risk. These complications aside, most first time home buyers and many others prefer the ease of a fixed interest mortgage since the details remain the same from the first monthly payment until the end. Knowing what you will owe on your home each month without worrying about the market can be reassuring if you like to have a monthly budget that you stay very closely in the lines with. It offers you a great deal of security in your home equity because you know that you will always be able to afford your mortgage payment no matter what outside factors are at play. For those who do not like the idea of gambling with the housing market and changing interest rates, you may pay a little more upfront at times, but know that you are paying one principal interest balance on your home if you get a fixed interest rate mortgage. This is also an excellent if you plan on keeping your home for a long period of time before selling, since you will likely see a return in your slighter higher interest rate when the natural market rises and your interest rate becomes low.
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