There are many mortgage products available in the market place. Currently there are fewer but there are still options. Below are a few reasons why you should be getting a fixed rate mortgage. A loan that is fixed for the entire term of the loan.
Security: Let it be a lesson for us who have bought a home with money down and got into an adjustable rate mortgage that was fixed for a teaser period of 3 to 7 years. There are no guarantees in life and especially right now in the real estate market. Many homeowners home values have plummeted and left them with loans that will adjust and leave them unable to refinance into another fixed loan. Like I have said before your mortgage will most likely be the biggest financial obligation of your lifetime. Play it safe!
Cheap money: The current mortgage market has great rates right now. Fixed products have been below adjustable rate products to promote better lending and a more stabile economy moving forward. Rates are lower than they have been in years so it is a great time to take advantage of some great deals.
Protection Against Market Swings: As we are seeing right now the market is in a tail spin. A mortgage that has a 30 year term is a long term investment. History has proven that good things come those who wait. NO matter when you buy property; if you wait long enough you will make money. Be prudent in your decision to ensure you are in a loan that is fixed for the entire length of the loan term so you are protected against market swings. Even if your plan is to stay in the house for 5 years when you get your loan by getting something fixed that you can afford you have a built in safety net if things change 4 or 5 years later and you need to keep you current loan.
Paying off your principal balance: I have said this is a more specific article related to just paying off your home but I cant stress this enough. Mortgage interest is frontloaded. You pay the majority of your interest off in the first few years of your loan, after that you are paying towards principal (paying off your house). If you get and adjustable rate mortgage that is fixed for 5 years you have paid a ton of interest off in those first five years. Once you refinance, unless you get into a loan that has a term of 25 years of less, you are virtually starting the whole frontloaded interest process all over. This will get you nowhere fast. You might as well rent if you are going to take this approach because you are not getting anywhere. You are just renting your money for the bank but not actually making a dent in what you owe them.
There are a few independent instances when a fixed rate mortgage may not be the best option for you. Those instances are very few and far between so sticking with this mindset when you are investing in real estate will cover you in any market situation.
Good luck with your home financing!
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