Perhaps buying a house is the single most important investment during the lifetime of a person. Unfortunately it is not easy to make an informed decision. All potential buyers do not fully understand the various issues involved in the whole buying process. One of the issues involves a decision to consider adjustable versus fixed rate mortgages.
There is no simple answer which of the two will be better for a person. Any decision depends upon individual circumstances and preferences. Though a fixed rate mortgage is a little expensive, many first time home buyers go for the same.
Fixed Rate Mortgages
A fixed rate mortgage is easy to understand and is characterized with a stable rate of interest. So it is more certain and one will not lose peace of mind during periods of fluctuating interest rates. Other benefits are that this involves low down payment and few calculations.
Fixed mortgages are linked more with bond markets. Because of the elements of certainty and easy understandability, these are more popular especially with first time home purchasers.
On the other hand, fixed mortgages are generally offered at high rates of interest. Since these involve fixed rates, one will not be able to benefit from falling rates of interest.
Adjustable Rate Mortgages
There are many types of variable mortgages like standard variable rate mortgages, discounted, cash back and tracker mortgages.
Many buyers have been immensely benefited from variable interest rate mortgages. Professionals generally opt for variable rate mortgages. Many studies have shown greater savings with variable than fixed mortgages. These carry low rates of interest and falling interest rates get immediately reflected in them.
However, Variable interest rate mortgages require a higher down payment and are uncertain and are not easy to administer. This may not be suitable for many buyers with weak hearts as one is apt to be worried from fluctuating rates of interest.
The Choice
During these times, it appears that interest rates have fallen to very low levels and that these may not fall any further or too much. In view of this, fixed rate mortgages may be preferable for the time being. An informed decision can be made in consultation with experts.
There is no simple answer which of the two will be better for a person. Any decision depends upon individual circumstances and preferences. Though a fixed rate mortgage is a little expensive, many first time home buyers go for the same.
Fixed Rate Mortgages
A fixed rate mortgage is easy to understand and is characterized with a stable rate of interest. So it is more certain and one will not lose peace of mind during periods of fluctuating interest rates. Other benefits are that this involves low down payment and few calculations.
Fixed mortgages are linked more with bond markets. Because of the elements of certainty and easy understandability, these are more popular especially with first time home purchasers.
On the other hand, fixed mortgages are generally offered at high rates of interest. Since these involve fixed rates, one will not be able to benefit from falling rates of interest.
Adjustable Rate Mortgages
There are many types of variable mortgages like standard variable rate mortgages, discounted, cash back and tracker mortgages.
Many buyers have been immensely benefited from variable interest rate mortgages. Professionals generally opt for variable rate mortgages. Many studies have shown greater savings with variable than fixed mortgages. These carry low rates of interest and falling interest rates get immediately reflected in them.
However, Variable interest rate mortgages require a higher down payment and are uncertain and are not easy to administer. This may not be suitable for many buyers with weak hearts as one is apt to be worried from fluctuating rates of interest.
The Choice
During these times, it appears that interest rates have fallen to very low levels and that these may not fall any further or too much. In view of this, fixed rate mortgages may be preferable for the time being. An informed decision can be made in consultation with experts.
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