Advantages and Disadvantages of a Fixed-Rate Mortgage
November 22, 2008
For many people, whether first time buyers or not, the prime consideration when looking at a fixed rate mortgage is the monthly installmet cost. Purchasing a home later in life means that many individuals need to have the mortgage settled early. But, before you commit yourself and sign any documents, there are a number of issues you should consider.
Over the course of the loan, it’s important to remember to make sure the rate of interest doesn’t alter. If you are offered a deal that appears to be too good to be true than it in all probability is. The rate of interest remains the same for long run fixed rate mortgages over the life of the loan. If you are someone that wants a loan with a dependable fixed monthly mortgage payment with no hidden supplemental charges then this is the main benefit with this type of arrangement. When my wife and I were looking at homes for sale we decided to look into the assorted loans available with a fixed rate mortgage. Although it was fundamental for us to settle our mortgage as soon as we could, we didn’t wish high, unrealistic monthly installments which we would have a problem maintaining.
It became obvious that we had to look at fixed rate mortgages over a longer period and not just 15 year fixed mortgage rate schemes. No-one likes the idea of having a mortgage when they are close to retiring, and we were no different, so it was still our hope that a fifteen year fixed mortgage rate would still be an alternative. We felt there was a good deal of insistence to have the house paid off as soon as possible and for the most part we agreed with this. Discovering my wife was pregnant was the clincher, although this wasn’t the only reason we reached this decision. Because my wife desired to raise our child at home we couldn’t be certain of her monthly fiscal contribution to our household spending. Unfortunately, a higher monthly payment is the downside of loans on a 15 year fixed mortgage rate plan. All things considered, we just didn’t want to bite off more than we could chew as the cost of bringing up a child was an unsure factor.
Despite the trepidation of having a longer term mortgage, the 30 years fixed mortgage rate did reduce the monthly installments considerably. Also, where possible, making a few additional lump sum repayments during the year helps bring down the sum of money owed. Just by making a handful of extra installments throughout a twelve month period you can knock years off of your mortgage period. This is well worth the effort in the long run but it does require some discipline. Taking our current needs and fiscal abilities into account was more serious than our desire for a shorter term fifteen year fixed mortgage rate program. All in all though, things worked out very well for us and we’re pleased we made the decision we did.
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