What are the benefits of a fixed rate mortgage? |
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Answer:
There are pros and cons and these usually differ depending Right now, a fixed rate mortgage has more benefits than usually because the interest rates for a fixed rate mortgage are very close to an Adjustable Rate Mortgage and an Interest Only mortgage. ARMs and Interest Only mortgages have a lower interest rate but the difference is not significant enough for me to consider either of them unless I only plan on living in the residence for a couple years. In a fixed rate mortgage, you are usually paying interest only for the first couple years. After you've covered some initial interest payments your payment then starts to draw from the principle or you begin to pay down the purchase price and build equity. So if you plan on living in the residence for more than a couple years it may make more sense to apply for a fixed rate mortgage, pay a little more in your monthly premiums in order to build some equity and hopefully profit from the sale once it comes time to sell. Fixed rate mortgages also allow you to remove certain costs called PMI or Private Mortgage Insurance. To remove PMI you need a second mortgage usually in the form of a Home Equity Line of Credit. By doing so, you may save yourself enough money to cover the difference in interest rates from an ARM or Interest Only mortgage loan. If ARM and Interest Only interest rates drop significantly lower than fixed rate mortgages then there are more instances in which an ARM or Interest Only Mortgage have more benefits. Trackback(0)
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