Looking To Buy Your First Home? Why You Should Start With A Fixed Rate Mortgage
If you're going to be buying your first home, it's time to start thinking about your home loan; or specifically the type of loan you're going to get. There are two different types of loans to consider; fixed rate and adjustable rate. If you're given the option, you need to choose a home fixed rate mortgage. Here are just four of the reasons why that decision will be the best one you can make when purchasing your first home.
Allows for Long-Term Budgeting
When you're starting out your new home, you want to be able to budget your money. That can be difficult to do when you don't know what your house payments will be from year to year. Unfortunately, that's what you'll be facing if you choose an adjustable rate mortgage. That's because your payment will be adjusted at specific times throughout the life of the mortgage. However, with a fixed rate mortgage, your payments will never change, which will make it easier for you to create long-term budgets for your family.
No Worry About Rising Interest Rates
One of the problems with adjustable rate mortgages is that they're directly linked to the rise and fall of interest rates. Dramatic increases in interest rates can bring about dramatic increases in your monthly house payments. However, if you've chosen a fixed rate mortgage, you won't need to worry about the interest rates, because yours will already be locked in.
Sizable Balloon Payments are Avoided
When it comes to adjustable rate mortgages, there's one component that can present a serious threat to your financial stability. Most adjustable rates come with a built-in balloon payment that will be due towards the end of the mortgage. The balloon payment is an accumulation of the principal that has built up each time your rates adjusted. Depending on the loan, that balloon payment could be quite sizable. Luckily, you'll never need to worry about a balloon payment when you choose a fixed rate mortgage.
Costs Less Over the Life of Your Mortgage
If the lower beginning interest rates are enticing you into signing up for an adjustable rate mortgage, you should know that your rates may change dramatically over the years. What begins as a lower interest rate may end up being significantly higher than the fixed rate you're being offered right now. By choosing the fixed rate, you'll be saving money over the life of the mortgage.