Fixed Rate Mortgages The Ups And Downs

Fixed Rate Mortgages The Ups And Downs



As the​ title of​ this article would suggest,​ I am going to​ take you​ on​ a​ journey through the​ ups and downs on​ fixed rate mortgages. When buying a​ house,​ especially the​ first one,​ I think that it​ is​ literally the​ most terrifying experience that I have been through,​ and I have combat experience as​ a​ military veteran. For those of​ you​ who find yourselves still anticipating the​ purchase of​ your first home,​ let me give you​ a​ brief rundown of​ what it​ is​ and what it​ isn’t. What it​ isn’t will be the​ easies to​ tell you​ about. it​ isn’t like going to​ the​ store and buying what you​ want by swiping your card. it​ isn’t even like buying a​ new car,​ although the​ new car buying experience is​ a​ little bit closer. it​ is​ like looking at​ dozens of​ houses that you​ hate in​ order to​ find one that you​ like,​ only to​ learn that it​ is​ $10,​000 more than you​ wanted to​ spend. So you​ make an​ offer and wait to​ see if​ the​ seller takes the​ offer or​ sends back a​ counter-offer. Once the​ game of​ offer/counter-offer is​ through you​ set up a​ closing date. at​ the​ closing you​ sit down and sign enough papers to​ make Leo Tolstoy quake in​ his boots. Once that hour devouring procedure is​ done,​ the​ house is​ yours and you​ are in​ debt for 30 years. Sounds appealing doesn’t it? Well,​ actually,​ it​ really is. But,​ before you​ get to​ the​ point where you​ can sign all those papers,​ you​ have to​ decide on​ what kind of​ loan will be best for you. There are a​ couple of​ different options and,​ in​ this first installment,​ I will discuss the​ fixed rate mortgage.
Overview of​ a​ Fixed Rate Mortgage

As the​ name would suggest,​ the​ fixed rate mortgage is​ a​ loan that has constant payments. By constant I don’t mean that they will be due every month (although they will),​ rather I refer to​ the​ fact that they do not change. if​ you​ get a​ fixed rate mortgage and the​ payments are $900 per month,​ they will remain at​ $900 for the​ duration of​ your loan. Nothing changes,​ it​ is​ set in​ stone,​ and you​ can set your clock by it,​ $900 a​ month for 30 years.
Benefits of​ a​ Fixed Rate Mortgage.

There are a​ number of​ benefits to​ having a​ fixed rate mortgage. I would like to​ discuss two of​ them,​ the​ planning power that it​ gives,​ and the​ financial liberty that you​ can take from it. Let’s start with the​ planning power.

Planning Power
To take on​ the​ responsibility of​ a​ $150,​000,​ $200,​000,​ or​ even $1million dollar debt is,​ as​ a​ mentioned before,​ very scary. But,​ to​ know that all you​ will ever be required to​ pay is​ $900 a​ month (or whatever your payments end up being. I don’t in​ any way want to​ insinuate that all mortgage payments are going to​ be $900 if​ you​ get a​ fixed rate.) is​ a​ very comforting piece of​ knowledge. you​ can plan your budget around that amount and make sure that you​ can always afford it. it​ really helps things out to​ have that amount set in​ stone. the​ next thing that most people get out of​ a​ fixed rate mortgage is​ financial liberty.

Financial Liberty
What I mean by that would be best communicated in​ the​ description of​ a​ hypothetical scenario. Picture a​ young couple,​ just out of​ college,​ just married,​ and brand new at​ the​ jobs in​ their respective careers. They decide to​ take out a​ loan and buy a​ house. They,​ because of​ the​ salary restrictions that they are working with,​ can only comfortably afford $500 a​ month. They know that this won’t get them the​ house that really want so they decide to​ stretch a​ lot financially and get a​ house that will run them $800 a​ month. After two years they both get promotions and their bills get easier to​ pay. After another two years they both move into management and get more promotions. Suddenly they find themselves in​ a​ position where they can actually comfortable afford to​ make $900 a​ month payments,​ and later on​ they can make $1000 a​ month payments,​ but they don’t have to. All they are required to​ do is​ $800. Every amount of​ money that they pay over $800 in​ a​ month goes towards paying off the​ principle and this gets their house paid off much faster. When the​ house is​ paid off,​ there is​ $800 a​ month that is​ no longer being tied up in​ living expenses. you​ see,​ in​ a​ fixed rate,​ 30-year mortgage,​ it​ will take 22 years to​ pay half of​ the​ principle because so much of​ that money is​ going towards the​ interest. if​ you​ consistently pay more each month than the​ minimum payment you​ can pay off a​ 30-year mortgage in​ 20 years easily.

Final Synopsis
For the​ young,​ first time homebuyer with a​ solid income,​ a​ fixed rate mortgage is​ a​ pretty good option. it​ allows,​ as​ was earlier stated,​ predictability and the​ possibility for earlier financial liberation. For the​ older first time homebuyer this is​ the​ best option. the​ ability to​ pay off a​ mortgage in​ less than 30 years is​ something that becomes very important as​ retirement approaches. For the​ buyers that are on​ a​ much tighter,​ less predictable budget,​ this may not be the​ best option. in​ that case there are other mortgages that would be better suited for their needs. But,​ as​ with all mortgage and real estate decision,​ sit down with a​ professional who can assess your individual needs and come up with a​ plan that is​ right for you.




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