The Pros and Cons of Fixed-Rate Mortgages
When looking to apply for a mortgage loan to purchase a new home, one of the first big questions you’ll have to ask yourself is this: Fixed-rate mortgage, or adjustable-rate mortgage?
In truth, which type of mortgage is “better” really depends on a number of individual factors. As a leading mortgage lender in Salt Lake City, Econ Mortgage experts are here to help you weigh all the pros and cons of the two types, plus numerous other factors that may arise during the home loan application process.
For many people, fixed-rate loans offer the simplest and most beneficial qualities. What are some of the pros and cons of fixed-rate loans?
What are Fixed-Rate Loans?
Fixed-rate mortgages refer to mortgages where interest rates and monthly payments remain the exact same throughout the life of the loan regardless of how the market changes during those years. The only way to change mortgage rates in a fixed-rate situation is to refinance, often a costly process that isn’t worth the eventual savings it may bring.
- Constant rates: Even if inflation takes mortgage rates on the open market up by 30 percent compared to the rate you got, it doesn’t matter. You pay your set, agreed-upon rate.
- Ease in budgeting: With the clear knowledge of what your monthly mortgage expenses will be, planning for other costs is much easier.
- Easy to understand: Fixed-rate mortgages have fewer hoops to jump through and less difficult terminology, so people applying for the first time may find it easier.
- Constant rates: These are a double-edged sword. It’s great if rates rise well above yours and you don’t have to pay those large amounts, but what if rates drop significantly after you’ve locked in your agreement? Your only option here would be refinancing, which can be very costly.
- High costs: Fixed-rate mortgages generally have high interest rates and don’t offer early payment options.
- No customization options: Most lenders keep various types of adjustable-rate loans available on their books so they can be customized for individual borrowers. Fixed-rate mortgages are generally the same across the board regardless of lender, so they aren’t as customizable.
Econ Mortgage is a premier mortgage broker in Salt Lake City, and our experts are standing by to answer any questions you may have.