Fixed rate home loans are a great option for a large number of people who are looking to buy a home. This type of loan is one that has the same interest rate, and therefore the same monthly payment for duration of the loan. A fixed rate loan is one that is exactly the opposite of an adjustable rate mortgage, or ARM loan as they are often known. There are many benefits to having a fixed mortgage!
Probably the most obvious benefit of fixed home loans is that they allow the homeowner to know exactly what their monthly mortgage payment will be each month for the entire term of the loan. This can be a big deal for people who live on a budget, when people are changing jobs, and that sort of thing. Knowing that your payment will always be the same will allow you to plan for the future much more easily.
Another benefit of this type of loan is that it is easier to understand. With an adjustable rate mortgage you may have a hard time understanding when it will change and what the rate will change to. When you have a fixed rate loan you will find that there is no confusion, instead you are comfortable with your loan because you know what the rate is now, what it will be in the future, and you will be able to plan for it.
Many people are taken in by the adjustable rate loans because the payments are really low. While low payments are nice, one thing that is great about the fixed rate home loans is that with each payment you are building equity in your home. In addition, you never have to fear when your payment is going to go up and you know all along the way that you are building equity and paying off the loan instead of just paying interest a lot of the time like you are when you make payments early on during your ARM loan.
When you ask a lot of people who have had an ARM loan what the best thing is about fixed rate home loans they will tell you that the best thing is that there are no surprises, such as five years into your loan term. With an ARM loan the payments are really low for the first five years and then suddenly your payment will increase by hundreds of dollars. If you cannot make the payment you could lose your home. The fixed rate loan does not have any surprises, and that is a good thing because you can always plan to pay the same amount each month for as long as 30 years!
These are the benefits of the fixed rate mortgage programs out there. This being said, the fixed rate option is not the best option for everyone. If you only plan to live in a home for three or four years before you sell, it may be a good idea to go for an ARM loan so you can take advantage of the low payments. If you plan to buy and stay in the home for more than five years, a fixed rate option may be a better way to go just for the peace of mind that comes with it.