Fixed Rate Mortgage Advice

Deciding which type of mortgage would be best for your situation can often be a daunting task when considering the number and type of mortgages available today. At one time, prospective home buyers had few mortgage options available to them. In most circumstances, individuals either paid cash for their home or financed it using a fixed rate mortgage. Today, however; there are a number of mortgage options available and with the fluctuation of the mortgage interest rate market; it can sometimes be difficult to know whether it would be more beneficial to go with a fixed rate mortgage or an adjustable rate mortgage. Taking the time to get some fixed rate mortgage advice before you sign on the dotted line can make the difference between enjoying your home purchase and wondering if you’ve made a mistake.

The first aspect about a fixed rate mortgage that homebuyers need to understand is that the name of this type of mortgage implies everything about it. It is fixed; which means that for whatever amount of time you finance your home, you will be stuck with that interest rate. Let’s say you finance your mortgage for 30 years at a 7% interest rate. Five years down the road, interest rates drop to 5.25%. Obviously, this interest rate change would make a huge difference in your mortgage payments. However, you will still be paying a 7% interest rate, even though the prime rate has dropped, because this is the agreement you made when you obtained your mortgage. Just because the prime interest rate drops, does not mean you will be able to access the lower interest rate.

Now, with that said; it may still be possible to take advantage of the lower interest rate if you refinance your mortgage. This will be the only way you will be able to get the lower interest rate, however. The interest rate will not automatically drop; you will need to refinance and take out a new mortgage at the lower interest rate.

There are some benefits to a fixed rate mortgage. This type of mortgage can be advantageous if you want to keep your mortgage payment the same over the course of the mortgage loan. For individuals who need to know the exact amount their mortgage payment will be every month for budgeting purposes; this is a great situation. With the adjustable rate mortgage; you would be able to take advantage of the lower interest rate if the prime rate drops. The major disadvantage, however is that if the rate goes up, your monthly mortgage payment would also rise accordingly. That is never a concern with the fixed rate mortgage. The mortgage payment will remain the same no matter what the interest rate market does.

So, in the end; the best fixed rate mortgage advice you can get is this: Weigh your mortgage options prior to financing the purchase of your home. If you want to play it safe and make sure your mortgage payment stays the same, then the fixed rate mortgage is the best way to go. If you’re a bit of a risk taker, want to make sure you have easy access to low interest rates and it isn’t as important to you for your monthly mortgage payment to stay the same; the adjustable rate mortgage may be the best idea.