When you think of something that is fixed, you think of something that is consistent, unchanging, and secure.
And a fixed rate mortgage is exactly those things.
This is the main reason it appeals to so many people, despite the fact that overtime, studies show variable mortgages end up costing less.
Many people just find the peace of mind a fixed rate mortgage offers too hard to resist.
With a fixed rate mortgage you pay the same amount of interest over the entire term (not amortization period) of the mortgage. The term on a mortgage can be from 1-10 years.
With a fixed rate mortgage you can also increase your payments to pay off your mortgage faster without affecting the interest rate.
Another advantage to fixed rate mortgages is that when interest rates are low, locking in a good rate can be a great move especially if you plan on owning the home you are purchasing for the entire term.
They’re also a wise choice if your income is going to remain relatively steady. In this situation, a fixed rate will help you plan your expenses without having to worry about what mortgage rates are doing.
Typically, interest rates on fixed rate mortgages are higher than variable rate or floating rate mortgages. That’s because if mortgage rates go above the rate you’re locked in at, the lender has to pay the difference.
However, with a variable rate, the lender has no chance of loosing money.
Are you a potential first time homebuyer looking to get the keys to your first place? Well your first step is to get pre-approved for a mortgage.
How? I’ve put together a five-part free email class that spells it out, step-by-step. Sign up below: Each one gets delivered to your email inbox hot & fresh about every 3-4 days. It it you’ll learn:
- Why you should get pre-approved now
- The nuts and bolts of mortgage pre-approval
- The documents you need to organize