There are different types of mortgage, but a lot of home buyers prefer to take out the fixed rate mortgage. What does fixed rate mortgage mean? Well, it simply means that the interest rate is fixed regardless of the socio-economic condition.
Advantage of Fixed Mortgage Rate
- With fixed mortgage rate, the interest rate will not be changed. So, you will know exactly how much you are going to pay every month. Hence, you will be able to plan other big expenses if you are going to opt for a fixed mortgage rate.
- The fixed mortgage rate doesn’t consider the inflation or cost of living. Hence, you will be able to make more money with this type of mortgage. In a few years from now, you will be earning more, but your monthly expense is just the same.
What about the Disadvantages?
- With fixed mortgage rate, you will miss the chance of availing lower payments, especially when the interest rate goes down. The supposedly saving can help you pay off other mortgages. With the changes in the economy, you will not be able to predict if the interest rate drops.
- If you have a fixed mortgage rate, you will have a difficult time getting an adjustable rate mortgage, especially for buyers who have a not so-good credit record. The lenders would surely want to work with somebody who has a good credit score when taking out fixed mortgage.
- If the interest rate drops, you will most likely end up paying more than what other home buyers are paying. If you want to adjust your mortgage rate, then the best option for you is to refinance. As you know, refinancing comes with expensive price tag. There are instances when refinancing is a great option, but it always depends on the case.
- The fixed rate mortgage is somewhat limited. What does this mean? Well, it simply means that you will be given a fewer options if you opt for a fixed rate mortgage.
As you can see, opting for a fixed mortgage rate comes with advantages and disadvantages. When making your choice, you should weigh your options carefully. If the circumstances are favourable to you, then by all means you should take out fixed mortgage rate. If you don’t know exactly what to do, then the best thing to do is to consult a mortgage expert. He will be able to help you come up with the best possible choice.