Four Benefits of a Fixed Rate Mortgage

By Adrienne Rockwell

With all of the unconventional mortgages that lenders are offering these days, it's good to know that you can still get a fixed-rate mortgage. Fixed-rate mortgages have several advantages over adjustable-rate mortgages, interest-only mortgages and other non-traditional loans that are getting people in trouble. Following is four benefits that you can enjoy if you qualify and choose a fixed-rate mortgage for your next home loan.

Inflation Protection

With a fixed-rate mortgage, you do not need to worry about the market's interest rates fluctuating or the rate of inflation. You can plan on the same mortgage payment each month regardless of what happens with inflation or interest rates. In addition to having the security of knowing your rate will be the same for the next 30 years, rates are at a historically low rate due to the current state of the economy. If there is ever a time to say "now is a good time to buy a home", NOW is that time...

Budgeting

When you know exactly how much your mortgage payment is going to be each month, it's easier to make a budget and live by it. Many home owners use a budget so they can set aside money each month for savings or retirement. With a fixed-rate mortgage, you can plan ahead and know how much money you can put toward other things every month.

Flexible Terms

As with many adjustable-rate loans, you can choose from a variety of repayment terms to fit your needs and your budget. The most popular is a 30-year fixed rate mortgage, but you can choose a 25, 20, or 15 year fixed rate mortgage if you want to pay off your home quicker or build up equity in less time.

Peace of Mind

With today's unstable economy, it seems like anything could happen at any minute. With a fixed-rate mortgage, however, you know you can still stay financially secure by keeping the same interest rate even if the stock market crashes or if another major economic catastrophe occurs. Sometimes, peace of mind is worth the extra half-point in percentage rates that you pay with a fixed-rate mortgage.

Fixed-rate mortgages are usually more difficult to acquire because the lenders are loaning money at an interest rate that may increase. As such, they are giving up the chance to get higher payments from you, the home owner, each month. Fixed-rate mortgages offer the mortgage payer a sense of security and peace of mind that other unconventional mortgages simply can't offer. If you're considering your first home or your next home, try to get a fixed-rate mortgage. In the long run, it's really the best option.

When you are checking with your lender, it is always a good idea to see how much less expensive an adjustable rate is, but with fixed rates as low as they already are, it's probably not worth the risk. (As a rule of thumb, you shouldn't consider a 5 or 7 year arm unless the interest rate is at least a percent lower than the fixed rate, and with current rates already at historical lows of 4.75%, it's pretty unlikely an adjustable rate will be low enough to justify the risk.

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