What is a Fixed Rate Mortgage? How can it Help Me with Today?

A fixed rate mortgage guarantees that the monthly mortgage payment will not change during the length of the fixed rate period. Fixed rate mortgages are usually for the initial period of the loan, anywhere from one year to ten years. After the fixed rate term ends, the mortgage will go to a variable rate for the remainder of the loan. A fixed rate mortgage has many benefits that can help out a new homeowner.

Advantages of a Modern Fixed Rate

One of the major advantages of a fixed rate mortgage is a guarantee that the monthly payments will remain the same during the fixed rate term.

Mortgage Broker Experts say “A fixed rate allows new homeowners to budget their money without needing to worry if their monthly payments will go up if interest rates rise. The amount that the homeowner will pay is set when they first take out a mortgage and the rate cannot change during the set period of time. Since the homeowner knows how much their monthly payments will be during the loan, they will not have to worry about the unpredictable rates in the future.” 

Protect Your Home

Having a fixed rate mortgage also protects homeowners if interest rates go up. Since the fixed rate was set at a time when interest was lower, it will not go up if interest rates rise. If the interest rates are low, like now and as predicted for the next two years, when a person decides to buy a new home, taking advantage of a fixed rate mortgage will protect them if the rates go up shortly.

Easy to Grasp

Fixed rate mortgages are also simple to understand. The rate is set based on current market prices, and will not change for a set period of time. At the end of the fixed rate term, if interest rates have dropped, then the new monthly payments may be lower than they were during the fixed term. This can help owners save money in the future. However, rates may go up during the fixed rate term, but it isn't necessarily a disadvantage. If the rates go up, the owner can look around and refinance their home at the lowest rate available, saving them more money than if they were to continue with their current loan.

Fixed rate mortgages can help a new homeowner guarantee that their monthly payments will remain the same over a set period of time. They will not have to worry about changing interest rates, and will not have to worry about their monthly payments getting so high that they cannot pay their mortgage.