| A Fixed Rate Mortgage Should Be The One You Choose |
| Articles - Mortgage |
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A fixed rate mortgage may be the one for you because of the benefit of a fixed period where you can sleep at night worry free.
A fixed rate mortgage may be the one for you because of the benefit of a fixed period where you can sleep at night worry free. We are in a period of ups and downs in the world economy. At the moment we have low rates but how long this will last is anybody's guess. In the not too distant past we saw interest rates more than double. Homeowners on normal variable mortgages saw their payment rise and rise till they were paying more than twice as much per month. That would really scare me, having to find more than twice my monthly payment. Another concern is that you may not be able to find the payments and face the repossession of your home. What can we do to avoid this situation? This is where a fixed rate mortgage is really beneficial as you get a fixed rate (meaning fixed payments) for a number of years. You know what you are going to pay regardless of wild interest rate highs and lows. When the rates more than doubled, those with fixed rate mortgages were thanking their lucky stars. If there were to be a big rate rise there would be lots of people you know finding it really hard to make the payments. With some getting into a serious financial hole. What other benefits come with a fixed rate mortgage? As well as the security of payments you generally get it with a discounted rate. So it means you are borrowing at slightly discounted rates. It's not all positive though, there are some pitfalls. If rates were to drop you have to stay on the fixed payment. Meaning you pay more than some other borrowers. But, at the outset you were happy to take the fixed rate mortgage deal so it should be easier to take a drop in interest rates against a sharp rise in them. If the rates drop, the worst that can happen is you pay a bit more than others. However the other way round and a swift rise has other people potentially having their homes repossessed. In conclusion, despite the small dangers I would go with a fixed rate whenever I could. For me, the small dangers are far outweighed by the huge benefits of a fixed rate mortgage. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Monty Burn was chief of the Voluntary Mortgage Regulator until his sacking for helping too many people. Discover how to get a great fixed rate mortgage deal or download Monty's Mortgage Bible at his site Mortgage Watchdog. Insider knowledge can be yours. |