Mortgage Services

When your parents secured a loan for their house, they no doubt got a 30 year fixed rate mortgage. At that time, mortgage loans were pretty much all fixed rate loans. It was the best mortgage people could get at the time. Now there is a dizzying array of mortgage loans available, with adjustable rates, balloon payments, and varying pay back schedules. But even with all the options available, the lowly 30 year fixed rate mortgage still may be the best mortgage. Here's why.

Stability Can Be A Good Thing

A stable monthly payment you can count on and budget for year after year. No matter how much interest rates rise, you will be paying the same rate for the life of the loan. To many people, this represents security. They can set their budget and know that their mortgage will always be the same. But, if you pay your taxes and insurance through your mortgage, your payment can and no doubt will rise as property taxes and homeowners insurance rise. But the actual principal and interest will not change.

Costs Less Than An ARM Too

A fixed rate mortgage will cost you less over the life of a loan compared to an adjustable rate loan. An adjustable rate loan will start off with a lower interest rate, but after a couple of years, depending on how you and your lender set it up, you will be paying a higher interest rate than a comparable fixed rate mortgage. If you are not planning on staying in your house more than a couple of years, an adjustable rate may be a better loan for you.

A potential downside of a fixed rate mortgage is in the event interest rates go down. I you are at a set interest rate you may be stuck with a rate that is higher than market rates, and have to refinance. Some fixed rate mortgages have a prepayment penalty that will cost you if you pay off early to refinance. You may find yourself in a no win situation and just have to keep making payments at the higher rate.

One option for first time home buyers considering an adjustable rate mortgage for the lower interest rate and associated monthly payments (for awhile)is a introductory interest only period. With this loan type, for a set time, say 10 years, only the interest is paid. Then a normal 30 year mortgage kicks in.

All in all though, it's very hard to beat the security and non-changing monthly payment stability of a 30 year fixed rate mortgage. It's no wonder this type of loan has been the leader for 60+ years since its inception.

Mortgage Services |