For most home buyers, especially those purchasing their first home, having a fixed rate mortgage is the way to go. Having a fixed rate mortgage gives them a sense of security because they will have a fixed payment every month. They know this is something they can afford and they don’t have to worry about it ever going up. That’s one of the main reasons this type of mortgage has been so popular for so long.
And because of the fluctuation in the housing market over the last few years, it has become even more popular today. And when you really think about it, there are a lot of great benefits that come along with a fixed rate mortgage. The first one being you know exactly what you will be paying each and every month. This is the total opposite of an adjustable rate mortgage where your monthly payment can change every month.
Adjustable rate mortgages is what has left many families without a place to live. With a fixed rate mortgage your monthly payment will be the same for the life of the loan. When it comes to fixed rate mortgages there are a variety of different ones you can choose from. You can choose a 10 year, 20 year, 30 year and in some cases a 40 year.
The key is to do your research and find the one that works best for you. All of them have their advantages and disadvantages. You have to go with the one that makes good financial sense for you. Most people will go with the 30 year fixed rate mortgage. It is by far the most common option. However, the one drawback is you will pay quite a bit of interest over that 30 year period.
So you really need to sit down and see if you want to pay that much interest or if you want to go with a 20 year fixed rate a pay less interest.
The great thing about a fixed rate mortgage is that your rates will never change. You are locked in for the life of your loan. If the interest rates go up, you rates will not be affected. On the other hand, if the interest rates go down, your rates won’t be affected in that situation either. However, if interest rates do drop you can refinance your home to take advantage of them.
Another benefit to getting a fixed rate mortgage is your ability to make larger monthly payments. Any extra you pay will go directly towards the principal of the loan. This allows you to pay off the loan even faster. You will often hear financial experts advise people to pay their mortgage twice a month. Half every two weeks. Doing so can save you a lot of interest and help you pay off the loan in 22 years instead of 30.
Another option you have with fixed rate mortgages is to make an extra payment every year. Doing this will cut down the amortization period to about 26 years. Overall a fixed rate mortgage is a stress free way to get a home loan. You have many options to choose from and in most cases there is no early pay off penalty.