Fixed Rate Mortgages:
Fixed-rate mortgages are the most common mortgage for many
homebuyers because the monthly payments are stable. The
interest rate you lock-in will be the same interest rate
you pay for the life of the loan.
What are the benefits of a fixed-rate mortgage?
1.) Inflation protection.
If interest rates increase, your mortgage and your mortgage
payment won't be significantly affected. Even if your taxes
or insurance costs go up over time, your basic loan payment
(principal and interest) will stay the same. This is especially
helpful if you plan to own your home for five or more years.
2.) Long-term planning.
You know what your monthly housing expense will be for the
entire term of your mortgage. This can help you plan for
other expenses and set long-term financial goals for yourself
and your family.
3.) Low risk.
You always know what your payment will be, regardless of
what current interest rates are. This is why fixed-rate
mortgages are so popular with first-time buyers.
There are additional considerations to be aware of with
fixed-rate mortgages:
1.) Your mortgage interest rate won't go down, even if interest
rates drop, unless you refinance your mortgage.
2.) Because the interest rate is generally higher than other
types of mortgage loans, you may not be able to qualify
for as large a loan with a fixed-rate mortgage.
3.) Your total monthly payment can occasionally increase
based on changes to your taxes and insurance. In many cases
you pay these costs through an escrow account that your
lender keeps for you.
