When taking out a mortgage loan, you will likely need to choose from either a fixed rate or a variable rate mortgage. For most home buyers, a fixed rate mortgage will prove to be the more beneficial option. Below you can learn more about the top three benefits that come with choosing this type of mortgage loan.
#1: Know Exactly How Much You Will Pay In Interest
Many people simply focus on the price of the home they want to buy when shopping for a home. However, the total cost of this home will be more than just the purchase price if you are planning to use a mortgage loan to make this purchase. This is because, in addition to the cost of your home, you will also need to cover the cost of interest on your loan. With a fixed rate mortgage loan, you will know exactly how much you can expect to pay in interest over the life of your loan. This will allow you to make a well-informed decision regarding whether or not the total price of your new home is a good investment.
#2: Avoid Potentially Higher Monthly Payments In The Future
When taking out a mortgage loan, it is important to ensure you are financially able to pay back this loan. After all, the last thing you want when buying a home is to have that home foreclosed on because you were unable to make your loan payments. A major part of this is knowing exactly how much you will need to pay each month. The problem with variable rate mortgages is that you could end up paying much higher monthly payments in the future if interest rates increase. This is not a problem with fixed rate mortgages because your interest rate will be guaranteed for the life of your loan even if interest rates go up during this time. This means that you can always count on having the same monthly payment each month regardless of how interest rates may change.
#3: You Still Have The Option Of Refinancing
The primary reason that people choose a variable rate mortgage is the hope that interest rates will go down over time and ultimately save them some money. If you are worried that a fixed rate mortgage will cause you to miss out on this opportunity to save, you should know that you could still have the ability to take advantage of lower interest rates in the future. This is because fixed rate mortgages can often be refinanced in order to allow borrowers to obtain more favorable loan terms once a portion of the principal balance has been paid off.
Contact a mortgage lender for more information on fixed rate mortgages.
When I started my own company, I knew that I needed a little business capital and fast. In an effort to raise money, I worked with various lenders to discuss loans, financing, and special terms. Unfortunately, I quickly discovered that not every loan was created equally. Some loans had almost predatory terms like high interest rates and penalties, while others were completely fair. Fortunately, a business consultant of mine taught me about loans and financing, so that I could make better choices in the future. The information on this blog saved my business, and I know that it can help yours too.