Why Fixed home mortgage rates is a smart option?
Advertising certain finance option as smart is rather dangerous. To decide if a mortgage or home loan is a good choice for a specific person involves a whole array of factors. To recommend a mortgage or home loan without knowing the specific circumstances of a borrower is like buying your wife a dress without knowing here size. You know that whatever you do you are going to get it wrong.
So why did we use the title “Fixed home mortgages a smart option”? If you were to revise the literature on home loans, mortgages and fixed rate home mortgages you would see that fixed mortgages are often describes as the not so good option. The option that is in all likelihood going to cost you the most and that people who REALLY like to budget choose. This is because fixed rate mortgages have higher interest rates than variable and adjusted rate mortgages.
The only two advantages fixed home mortgages presented was the predictable nature of the monthly payments with fixed rate mortgages. The second advantage is that you protect yourself from sudden rises in the interest rates that could drive your mortgage to unaffordable prices.
However, times have changed. The credit crisis has had two major effects on mortgages and loans in general. Until very recently banks were fighting for our custom and would hand over large amounts of cash on a pr0mise with little worry about collateral and background checks. Of course there were credit checks and mortgages were granted on credit rating and other requirements but these requirements were very lax to say the least.
Now to get a loan approved is much harder and takes longer too. Another outcome of the current credit crisis is a rather nicer consequence for us borrowers. Interest rates have dropped drastically to unheard of levels. This is where fixed mortgage rates come in. Fixed mortgages have generally been considered as overly conservative options due to the expensive nature of their interest rate. However 30 year fixed interest loans can now be obtained for 4.5% to 4.0%. This is an extremely low rate that is likely to rise substantially as soon as the current economy recovers.
However there are still some issues one must keep in mind.
1) Can you afford the mortgage? Even with reduced interest rates the mortgage won’t pay itself.
2) Beware of lengthening the tenure of the home mortgage in order to afford the house. Increasing the time you take to pay for a home will increase the interest you pay enormously.
3) Take the payment of your mortgage seriously. It is more important than ever to have a good credit rating for all kind of matters, from car insurance to job interviews.
As you can see taking on a fixed home mortgage is a new and viable option for borrowers. If you have the right situation, buying a new home or refinancing your existing mortgage might be a good idea.