Fixed-rate mortgages are one of the most popular mortgage loan options available. However, despite the many fixed-rate mortgage benefits, there are also some drawbacks to this particular type of loan. To help you make the best decision, here’s a breakdown of the various pros and cons of fixed-rate mortgages and how they may (or may not) affect you.
The Pros and Cons of Fixed-Rate Mortgages
There are plenty of mortgage loan options out there for you to peruse, but when it comes down to it, there will always be pros and cons to each of them. Just because a fixed interest rate mortgage isn’t perfect, though, doesn’t mean it can’t be the perfect option for you and your situation!
As always, it’s important to consider your options, assess your financial readiness, and then pursue the type of loan that makes the most sense for you. That’s what we hope these pros and cons of fixed-rate mortgages can help you do.
Fixed-Rate Mortgage Drawbacks
The primary disadvantage to the fixed-rate mortgage rates is—you guessed it—the high-interest rates you’ll encounter. And since you’ll experience higher interest rates, you’ll ultimately be paying more, and the amount of money you’re qualified to borrow may be more limited.
While there’s merit in paying a fixed-rate each month, it’s a double-edged sword, as it can mean paying more “if interest rates remain the same or fall in the future.” A fixed interest rate mortgage will also make it difficult to move anytime soon, so if you’re not planning on sticking around for solid five-to-ten years, then you might want to consider other mortgage loan options.
Fixed-Rate Mortgage Benefits
Fixed-rate mortgage rates are popular for a reason, and the benefits they provide can often outweigh any of the drawbacks. Not only are the monthly payments predictable, making it exceedingly simpler to plan a budget, but you won’t “have to worry about future higher payments” like you would have with an adjustable-rate mortgage.
The lower monthly payments fixed-rate mortgage rates provide will also offer “some flexibility to homeowners when their income rises. They can choose to pay more than their scheduled monthly payment, directing the additional payment toward the principal.” If you’re able, then lowering the principal on your loan can be a great way to save money and pay off the loan faster.
You also have a variety of fixed-rate mortgage options to choose from, as well. If a 30-year fixed-rate mortgage plan is too long, or if you’re looking for a bit more flexibility without having to agree to an adjustable-rate, then you can pursue a 15-year fixed-rate plan. 15-year plans involve higher monthly payments but lower interest rates and can lead to substantial savings on the total interest paid over the life of the loan.
Is a Fixed-Rate Mortgage Right for You?
The pros and cons of fixed-rate mortgages are many, which can make it tricky to decide whether this option is the right one for you and your situation. If you’re looking to settle into a home for the long haul, and want to pursue houses that may otherwise be out of your price range, then a 30-year fixed-rate mortgage plan can be the solution you’re looking for.
But if you know you’ll be looking to relocate within the next five-to-ten-years, and can afford to pay a bit more on your monthly payments, then a 15-year fixed-rate plan (or an adjustable-rate mortgage program) may be better suited to your needs. There is no right or wrong here, which is why it’s so crucial that you take the time to fully assess the pros and cons of fixed-rate mortgages and compare them against your needs.
Thankfully, you don’t have to do any of it alone! If you’re trying to find some of the most competitive mortgage rates on the market, or need a helping hand to guide you through the often complicated homebuying process, then Poli Mortgage is here for you! Reach out to us today and see firsthand how we can help you land your dream house.