Is a fixed home loan right for you?
There are plenty of home loans to choose from when purchasing or refinancing your home and a fixed home loan is one of the most popular choices there is. Fixed home loans offer plenty of features that are desirable to borrowers, but there are also other loans that may fit the bill too. If you’re wondering if a fixed home loan is the right loan for you, then take a closer look at what one has to offer to you.
Fixed home loans are offered for a maximum loan term of 30 years at a fixed interest rate, thereby allowing borrowers to lock-in a preset interest rate that will not ever change over the course of the loan.
What is the main benefit of a fixed home loan? Your interest rate does not change. This is the biggest draw when it comes to fixed home loans. In today’s ever volatile economy it’s comforting to many potential home buyers to know exactly what their mortgage payments will be each month so that they can budget accordingly.
On the other hand, adjustable rate mortgages can be beneficial to those who are more comfortable with assuming risk. By agreeing to an adjustable rate mortgage you can take advantage of lower payments if you anticipate being able to afford the higher payments that are to come in the future.
One of the easiest ways to decide if a fixed home loan rate is the way to go for you is to ask yourself this series of questions.
What can you afford? – Many borrowers mistakenly agree to the terms of an adjustable rate mortgage in lieu of a fixed home loan because truth be told, they really can’t afford a home loan to begin with. So, they tell themselves that they will have the money later, although they know that they have no plan in place to come up with the money in the future.
How long do you plan on living in your home? – The longer you plan on living in your home the more likely it is that you will benefit from a fixed home loan. If you take out an adjustable rate loan then sooner of later you will experience a hike in your loan interest rate since adjustable rate mortgage terms change over time.
Are you comfortable with risk? – If you are not positive that you can comfortably assume the risk of paying back an adjustable rate mortgage when the terms change then you should seek a fixed home loan. Don’t gamble on your home if you are not 100% sure that you can repay your loan on time and in full.