Fixed-Rate Mortgage Pros and Cons

Are you shopping for a mortgage? There are a lot of different types of mortgages out there, and choosing between them can be difficult. Each type of mortgage has its pros and cons, and if you choose the wrong type of mortgage for your situation, you could end up doing damage to your credit history or even losing your house.

The fixed-rate mortgage is generally seen as the “safest” type of mortgage, because the interest rate stays the same throughout the entire life of the loan. There are two different kinds of fixed rates mortgages: 30-year and 15-year.

Pros

The biggest advantage of having a fixed-rate mortgage is that your interest rate will never change, no matter what the market is doing. This means that:

• You can count on your payments being the same each month -- no skyrocketing to an amount higher than you can afford.

• You know from day one how much interest you will pay over the life of the loan, and how your payments will apply to the balance.

• If you want to refinance your house but you don’t want to be locked into another 30-year loan, you can get a mortgage with a 15-year term instead.

• With a 15-year loan term, you can pay off your debt in half the time, not to mention with less interest over the long run.

Cons

Although the fixed-rate mortgage is generally known as a conservative option, there are still a few disadvantages.

• If the market falls and mortgage rates drop, you will still have to pay the higher rate that you agreed to when you got your mortgage.

• Fifteen-year loan terms mean that your payments will be higher.

There are a lot of reasons why a fixed-rate mortgage may be the best choice for you. Its stability means that you won’t have to worry about losing your house if mortgage rates go up and you can no longer afford your monthly payment. However, before you decide to go with a fixed-rate mortgage, you should first learn about the pros and cons of other types of mortgages.

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