If you’ve found your dream house and want the perfect mortgage, a fixed-rate home loan could be your ideal solution.
A fixed interest rate mortgage can provide you with stability and inflation protection, as the portion of your monthly home loan payment that goes toward the principal and interest remains the same. That predictability is what makes these mortgages attractive to home buyers — and for many, they’re a smart option.
However, before you choose a fixed-rate home loan, you need to give the matter careful consideration. Below, you’ll find crucial information that could affect your mortgage decisions.
Length of the Fixed Interest Rate Can Vary
When you get a fixed-rate mortgage, you’ll lock in the interest rate for the duration of the home loan – or that’s what most people think.
In reality, the length of time that the rate remains fixed might be limited. It isn’t uncommon for a lender to offer a 30-year mortgage with a fixed period of just a few years, and if you don’t find that out ahead of time, you could be in for an unpleasant surprise down the road.
Monthly Payments Aren’t Set in Stone
With a fixed-rate home loan, the amount of money you pay toward the actual mortgage every month won’t change – but you may still see a higher bill at some point.
Many home buyers opt to have their home insurance and property taxes paid for out of escrow. In other words, part of what they pay every month is put into an account, and when the insurance premiums and taxes are due, the mortgage company uses those funds to pay. If you go this route and your insurance costs or taxes increase, your monthly payment will rise to cover the difference.
Fixed-Rate Mortgages Don’t Benefit Everyone
Though fixed interest rate mortgages are the most popular option, they aren’t the best choice for every home buyer.
As a general rule, locking in the interest rate can be advantageous if you’re planning to stay in the house you buy for several years. If you think you might not live there for more than a few years, the upfront cost – which is higher since the lender is risking a potential loss in profit – might be prohibitive. In addition, if the interest rate is currently high or your credit score doesn’t qualify you for favorable rate, you might want to explore other home loan options.
Should you go with a fixed interest rate mortgage? For expert advice, call on the professional team at Intercap Lending.
A trusted Utah mortgage provider, Intercap Lending has been helping people navigate the home loan process for decades. We can explain your options, answer your questions and find a mortgage that meets your needs. If you’re ready to buy your dream house, and want assistance weighing the pros and cons of a fixed-rate home loan, contact our Orem, Utah, office today.