Mortgages with fixed interest rates offer a degree of safety adjustable rate mortgages do not. With energy prices spiraling out of control and uncertainty over inflation here is why you need a fixed rate mortgage.
Traditional fixed rate mortgages, the kind your grandparents had, are making a comeback. Fixed interest rate mortgages typically come with term lengths of 15 or 30 years. The main advantage of a fixed rate loan is your payment will remain fixed for the duration of the mortgage.
Selecting a fixed rate mortgage will protect you from the economy. Interest rate hikes will not affect your monthly payment amount. This degree of financial safety could save you a lot of grief if you experience financial difficulties down the road.
The next factor to consider when choosing a fixed rate mortgage is the term length. Term length is the amount of time the lender grants you to repay the loan. Common term lengths for fixed rate mortgages are 15 and 30 year loans.
Thirty year loans offer lower payments amounts; however, these loans come with higher interest rates because of increased risk to the lender. You build equity in your home at a much slower rate because mortgage loans are front-loaded with interest. This means in the beginning, more of your monthly payment goes to pay interest than loan principal. A side benefit of paying more interest up front is your tax deduction will be greater.
The advantage of a 15 year mortgage is that you build equity in your home much faster. A 15 year mortgage comes with a lower interest rate because there is less risk to the lender. If you choose a 15 year mortgage your monthly payment will be higher; however, you will pay less interest each month to the lender.
With all the uncertainty in today’s economy why risk your financial well-being on an adjustable rate mortgage? Interest rates are still at historically low levels; invest some time doing your homework and shopping for a lender and you can find excellent deals on traditional fixed rate mortgages.
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Tucson Mortgage Refinance
Louie Latour has twenty years of experience in the mortgage industry as a mortgage broker. He is the owner of Mortgages Refinance Advisor, a mortgage help site devoted to saving homeowners money with a free guidebook “Mortgage Refinance: What You Need to Know.”
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