Why Fixed Rate Mortgage?

By Sonia Smith
If you are buying your first home, moving into a new house or renewing a mortgage, regardless of your situation, selecting a fixed rate mortgage means that you will not have to worry about fluctuating interest rates for the term of your mortgage. A mortgage is categorized as fixed rate, if the interest rate is fixed for a certain period of time. The fact that the mortgage interest is fixed means that a borrower knows exactly how much the payments will be during the fixed rate period.
Advantages of a fixed rate mortgage
A fixed rate mortgage comes with a fixed interest rate for the entire, or a selected term of the mortgage. The biggest benefit of this type of mortgage is that you know exactly what to expect, since you know:
• the interest on your mortgage;
• the amount of your monthly mortgage payments;
• the distribution of payment between principal and interest;
• the amortization of your mortgage.
Enjoy a guaranteed rate
When you take out a new mortgage, your fixed interest can be guaranteed for a fixed period of time, usually around 90 days, before the date of completion of the purchase of your home. If the interest rates happen to rise during this period, you will still be entitled to the lowest rate that you agreed with the lender within the guarantee time period. Check with your lender, or your mortgage broker to see how long a lender will "hold" the interest for you at a fixed level.
Interest Rates
The interest rates normally associated with a fixed rate mortgage tend to be higher than that of a variable rate mortgage. The rate is usually roughly around 1% higher than a variable rate mortgage.
Good in rising rates
A fixed term loan can be an excellent way to protect yourself form potential interest rises. If you feel that there is a strong likelihood that future rates are likely to rise then a fixed interest rate loan is an obvious choice as it protects the borrower from the loan getting more expensive at times of higher interest rates. However, remember that the loan can become costly if the rates are reduced and you are left paying a loan at a higher rate then the current interest rate.
Choose what suits you best
Deciding between mortgage types is not easy, which is why you need to talk to a qualified mortgage broker to help you pick the best product for you. You need to assess whether you want the security of knowing exactly how much you will pay monthly or you can afford to take a chance on a variable rate loan to benefit from any potential interest declines
If you want to talk to a qualified broker for residential or commercial mortgage products then pay a visit to the buy to let mortgage website.
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