A Fixed Rate Mortgage is a mortgage with interest that stays the same for the duration of the mortgage. These mortgages usually have term options that range between 10 to 30 years.
Is it a good idea to have a Fixed Rate Mortgage?
The benefit of having this type of mortgage is to have a constant interest. If the market goes up, for example, you will still pay the same interest on the mortgage. This is an advantage because you will not be affected by market fluctuations.
Fixed-Rate Mortgages are favorite to most homeowners due to its stability. If you are going to buy a house and want to have a stable monthly payment, this would be a great option for you.
It gives you a chance to plan for the future because you will know exactly how much you will be spending on the property every month.
However, if you think the market might move in a direction where you will pay less interest on the mortgage, you can have the Adjustable Rate Mortgage(ARM).
In this mortgage type, your rate will change in the direction of the benchmark interest rates. However, you will start with a fixed rate for the first few years and change to ARM later.
You must keep in mind that if you get the ARM, your monthly payment might be affected greatly. Therefore, you could end up with a higher monthly payment if you are not prepared financially.
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