Understanding Financing Terms

Is A Fixed-Rate Mortgage The Right Choice?

So many people feel confused when they begin shopping for a mortgage loan, primarily because there are many options to choose from and compare. One option is a fixed-rate mortgage, but this is not the only choice. If you consider this one of your options, you might wonder if it is the right one. Here is some information about fixed-rate loans to help you know what they are and whether you should get one.

The Basic Principles of Fixed-Rate Loans

When you choose a fixed-rate loan, you get a loan to buy a house with an interest rate that never changes. The rate is the same for the entire loan, which means that your payment amount never changes. You do not have to worry about the risk of the rate rising after a specific timeframe, and you will not have to worry about your payment amount changing.

Your Options

Getting a fixed-rate loan is not always the same, though. You have options. One option is the duration you choose. Most people get 30-year loans, but you can save a lot of money by choosing a 15 or 20-year loan instead. You can also choose to buy points to lower the interest rate you get. When you buy points, you pay a fee for a lower interest rate. You can buy one point or multiple points, and most lenders offer these.

Times When They Are the Best Choice

Fixed-rate loans can be the best choice in certain situations. People will often choose these when they plan on living in their homes for a long time. If you want to buy a house to live in for at least 10 to 15 years, a fixed-rate loan is the best option. You can secure a low interest rate now and not have any worries that it will rise.

People also like these loans when they want to avoid refinancing later. If you get an adjustable-rate mortgage, you might have to refinance later when the interest rate changes. You will not have to do this with a fixed-rate loan.  

You may also want to choose a fixed-rate mortgage if you suspect that interest rates will rise in the next few years. You can protect yourself by choosing this option.

Are you ready to get a fixed-rate loan? Does this seem like the right option? If you are interested in learning more about these loans or other options, talk to a lender in your area today.