This isn't to say that it's not a sound strategy to buy a home with a fixed rate mortgage instrument, but it should be known that there are distinct advantages and disadvantages of buying a property with a fixed rate home loan.
Advantages of Fixed Rate Mortgage Notes
Of course, the most touted benefit of getting a fixed rate loan is the fact the rate is just that--fixed. No matter the Federal Reserve monetary policy, which guides interest rates up and down, you'll have the same interest rate over the life of the loan, which typically term at 15 year and 30 year notes. That's great for budgeting and for disposable income as people tend to make more money as they obtain more experience in their careers.
Another strategic financial advantage of a fixed rate loan is choosing one with a shorter term, like a 15 year note. Though this ups your monthly mortgage obligation, you'll build equity at a much quicker pace and pay the debt instrument off faster. By doing this, you eliminate the lien holder in a shorter amount of time and then have a substantial asset for collateral.
Disadvantages of Fixed Rate Home Loans
Though these benefits do exist, there are some downsides to being locked-in to a fixed rate mortgage. The first being that it's fixed and therefore, when interest rates fall, you can "automatically"
Qualification standards are also more strict with fixed rate instruments, but adjustable rate mortgages are generally easier to qualify for, which can be a better option for consumers with less than perfect credit. What's more, these types of home loans are not as diverse as other mortgage products, meaning there are generally fewer options available when going this route.
Other things to consider are the time you plan on spending in the home. For instance, if you know that you'll only be in the home for less than ten years, then a fixed rate, 30 year term isn't as good of an option as an adjustable rate or even a 15 year note.
Kim Bagnell Thaler is a pioneer among Florida Keys realtors. Regarded as one of the most influential realtors in the middle and upper keys, she provides expert and professional real estate service. With her vast knowledge, 20 years experience and commitment to the highest ethical standards, Kim remains a standout among other Florida Keys Real Estate companies
Kim Bagnell Thaler
Kim Bagnell Thaler