Quit Setting Your Money On Fire

Are You Feeling Lucky? Why Fixed-Rate Mortgages Are Still The Way To Go

by Kathryn Watson

Are you trying to buy a house and want to get a mortgage? The housing market has recovered (and then some) in many areas of the country, which means prices and mortgage amounts are rising. But that also means that you may be tempted to take out an adjustable-rate mortgage to deal with the initial high price of the home. ARMs can be helpful in certain circumstances because you can either pay a lower amount at first and save money, or pay a higher amount at first and pay off more principal. But fixed-rate mortgages are still the best because they are more stable. And in turn, that makes your situation more stable.

Fixed Rates are Still Pretty Good Now

Right now, fixed-rate mortgages are still pretty good. Even if the current rates go up, they're still comparatively low and would have you paying a very reasonable amount of interest. ARMs may be looking good, too, but they are more volatile because you don't know what the rate will be in a few years. You're kind of racing against time if you get an ARM. It is true that the rate could go down by the time you finally start paying the full interest rate on your mortgage. But that's a risk that's often not worth taking.

You Know What You're Dealing With

When you have a fixed-rate mortgage, you know what you're dealing with for the life of the loan. It is a lot easier to plan your budget when you know exactly what you'll be paying. Fixed rates also help you plan your future because you don't have to take a potentially large jump in interest into account. If you want to pay off your mortgage early to reduce the interest you pay, it's a lot easier to plan into the future when you know what the interest rate will be.

Less of a Risk for Flippers

Sometimes ARMs are good for people intending to sell quickly, like house flippers. However, flipping is never guaranteed. You could have a wonderful house and then see the housing market drop again right as your rate is about to go up. You'd be stuck paying the higher interest rate on the house as you tried to compete for buyers. With a fixed-rate mortgage, though, you don't have that looming deadline of a potential rate rise haunting your house-selling efforts.

Fixed-rate mortgages are not as difficult to get as some make out. Asking for a fixed-rate mortgage is a sign you want stability in your financial affairs, which could be a positive point in the mortgage lender's eyes. Click here to learn more about low interest home loans.