Mortgages: Fixed Mortgage Rate

Mortgages: Fixed Mortgage Rate
by Harley Rolland

Your mortgage loan has a significant role to play in your financial life. You might be already confused whether to go for fixed mortgage rate or adjustable mortgage rate. Well-wishers might also add to your confusion, when they advice you to go with fixed mortgage rate saying that it entails lower risk than a variable rate. Why is this so? Read on to know why it is considered the best mortgage rate.

• Advantages & Disadvantages:
  

In this program, the rate of interest remains fixed throughout the loan's term. The monthly repayments are also not affected by inflation. In comparison, the adjustable mortgage loan has an adjustable rate or interest that rises or lowers with the fluctuations in the economy.

Here is how you benefit if you choose a fixed mortgage rate:

• Interest rate of this program gives you the peace of mind to plan your repayment.
  
• As your monthly payment does not change, you can use your funds more effectively.
  
• If you take a program when the market offers high competition, you might even get offered the 'golden' chance of getting a fixed rate that is lower than adjustable rate (note that the fixed rate is always taken as higher than adjustable rate).
  
• Fixed loans are the best for salaried people on a tight budget. A fixed-rate mortgage is also a better option than an adjustable loan for young people and first-time buyers.
  

Like there are two sides to a coin, there are two sides to a fixed mortgage loan too. Yes, I am referring to its drawbacks. You should be aware of these as well:

• The interest rate of fixed loans is higher than that of the adjustable mortgage loan.
  
• The fixed loan's interest rate is fixed for about 2-3 years and then reviewed as per the market. So, your loan is also subject to changes in the future (and chances are high that the interest rate will only increase!).
  
• Another thing is that if you plan to switch your mortgage company, you will need to pay a higher fee to implement new loan as well as pay off the old loan.
  

Finally, to make the right choice, seek professional help. A financial advisor will be able to help you make the right choice as per your lifestyle, income and needs.