Fixed Rate Mortgage Pros And Cons In Detail
are a lot of loan options out there if you are looking to buy a new home or to get a mortgage refinance. Most of
the loans that are available to you will fit into the category of an adjustable rate mortgage (ARM) or a fixed
rate mortgage. When comparing the two types of loans, there is not one that is better than the other, but they
do both have some pros and cons. When you understand the pros and cons of each, you will better be able to make
the decision of which type of loan to get.
A fixed rate mortgage is
the most common type of loan because it creates a security for the borrower. With a fixed rate mortgage, the
interest rate will not adjust unless they decide to do some refinancing. Thirty year, twenty year, and fifteen
year mortgages are pretty common for a fixed rate mortgage, but there are other terms offered by some lenders,
including a forty year or a ten year loan. Knowing that your interest rate will never become higher can help you
to always have a budget and be able to stay within your budget. The monthly payment will always be the same
unless your homeowner’s insurance and property tax are included in the payment each month because those two
things might cause the payments to go up or down.
At the beginning of the
loan is when most of the interest gets paid from your monthly payments, with the principal being paid off at the
end of the term. If you are able to pay extra payments each month, you will notice that the extra goes straight
to the principal, meaning that you will decrease the loan amount and also decrease the length of the term of the
loan. With a fixed rate mortgage, you can get mortgage refinancing, loan purchasing, and even a bad credit
mortgage. Talk to a loan officer about these different possibilities so that you know what you should be getting
that will be the best for you.
While there are mostly pros
for a fixed rate mortgage, there is one main con. If you want to pay down the mortgage, a fixed rate might make
it too high for you to make extra payments. This is why people get adjustable rate mortgages, because they have
much lower rates in the beginning so that you can make those extra payments.