Fixed rate mortgages: A different type of mortgage

A mortgage is the loan that one takes out in order to pay for their home. It is the largest amount of money they will ever borrow in their life in almost any situation. Given this, it is highly important that anyone about to get a mortgage knows exactly what is available to them out there.

Most of the media coverage and stories we all hear about focus on variable rate mortgages. These are the most common type of loan deal because the interest rate on this kind of mortgage is lower than a fixed mortgage. This means that the vast majority of people sign up for this kind of loan over the fixed one because they want to get the immediate savings that come with getting the variable one. However, this does not mean that this is necessarily the best case scenario for you.

Get the fixed rate locked in at a certain amount can actually be a huge benefit to you in the long run. Sure, you are going to be paying above what the market has pegged rates at in the moment, but you will likely save some money at some down the line. When rates are low, it is very financial savvy to lock in those rates for the long run. You have to remember at times like this that a home loan is for a very long period of time. Most of them run for at least 15 years with most going for 30 years. If you can lock in low rates now, then you are still going to be benefiting from them 30 years from now potentially.

At the same time that there are so many advantages to the fixed rate, there are also some downfalls. If you mistime the market, then you might end up with a fixed rate that is very high. You would then be locked in at that high rate even as the variable rate available is falling. It would be possible for you to refinance under these conditions in order to amend this problem, but this is just extra work you would not have to worry about with the falling variable rate.

People will always find something to complain about when it comes to paying a fixed rate. Most just don't like the idea of having to pay a little bit more than the market rate at the current moment. If that is your situation, then you are more than welcome to try your luck with the flows of the marketplace. However, those who really like to stay on top of their finances are going to be wise enough to lock in on good rates and maintain this kind of payment for themselves for the long haul.