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Advantages and Disadvantages of a Fixed Rate Mortgage

Home » Real Estate » Should I get a Fixed or Adjustable Rate Mortgage? » Advantages and Disadvantages of a Fixed Rate Mortgage

If you are still unsure of whether a fixed rate mortgage is right for you, it might help to look at a brief summary of its basic advantages and disadvantages.

Advantages of Fixed Rate Mortgages

• Interest rates and monthly payments remain consistent over the period of the loan so there will be no surprises or changes no matter what the market and economy is doing.
• Some feel that fixed rate mortgages are safer for first time buyers because there is less to figure out. You either can or can't afford your payments and you won't need an expert to explain that to you.
• Some also feel that fixed rates are safer if you feel that your job is unstable or there is not much room for advancement. In this case, if for some reason you did lose your job or chose to pursue other paths you would know exactly what you need to bring in to continue paying on your mortgage.
• Fixed rates make budgeting easier. Because you know with certainty what your monthly payments are, you can easily manage the rest of your budget without getting into any unforeseen trouble.

Disadvantages of Fixed Rate Mortgages

• There is not much diversity in finding different rate plans among lenders. One of the first things experts recommend doing is shopping around to find the best deal, but with fixed rate mortgages that is difficult because most all lenders plans look the same. There is no real customizing to fit your particular needs.
• If interest rates take a big fall, you would have to refinance in order to cash in on the trend. That means having to spend more time setting up appointments, going through records, and most importantly paying closing cost again.
• For some, fixed rate mortgages are just too expensive when first starting off especially in highly desired areas.

Next Page: Adjustable Rate Mortgages

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