Is A Fixed Rate Home Loan For Me?

by : Ajeet Khurana

With the current mortgage crisis in the United States many people are wondering if the fixed rate loan is the best deal for them.

Despite all of the negative press that is out there about sub prime and adjustable rate mortgages these are great choices for some people.

Of course, on the flip side is the fact that a fixed rate mortgage is a better deal for them for a wide variety of reasons. So, is this the right type of financing for you?

Who It Works Best For

This type of loan is one where the interest amount stays the same for the duration. So, if you have a 15, 20, 30, or 40-year program your interest amount will stay the same unless you decide to refinance.

There are many who find that this is the only way that they can afford a home, or more accurately the only way that they want to afford a home.

This type of program should be considered by those who plan to stay in their house for at least five years.

If you plan to stay in your house for less than that time, you will find that the ARM programs may benefit you as their rates start out much lower and you can take advantage of that with lower monthly payments.

Many people like the rates that stay the same because they never have to worry about a change in their payments. With the ARM loans many of them are shocked by how much their payment goes up after five years and they find that they simply cannot afford their home any longer.

If you are buying a home that you will be in long term it is usually better to have a fixed monthly payment that you can work into your budget and simply have the comfort of knowing that this amount will not change.

A lot of people like the 30 year loans with the fixed interest amount because it locks in one interest rate and because of this they know that the payment will never go up unless they decide to refinance, or decide that they want to pay more on the balance each month.

What this means is that, even if you never make more money than you are making now you should be able to continue to afford your home. A lot of them simply feel more comfortable with this, especially because many believe that rates will only rise and make housing more unaffordable.

So, the bottom line is that if you like to be able to budget in one amount into your overall budget and you plan to stay in your house for five or more years, the standard fixed rate mortgage or loan is the way to go.

This is also the way to go if you have any indication that the rates will rise, as this can mean that your ARM loan will shock you a few years down the line when it is adjusted.