Finance Your Mortgage Through A Fixed Rate Or An Adjustable Rate

The only way to answer this question is to know exactly what is going to take place with our economy in the next two to five years. When choosing a mortgage, you need to consider a wide range of personal factors and balance them with the economic realities of an ever-changing marketplace.

Individuals' personal finances often experience periods of advance and decline, interest rates rise and fall, and the strength of the economy waxes and wanes.

Then you have to ask yourself: how large of a mortgage payment can you afford, could you still afford the payment if it increases, how long do you intend to live in the house, and do you believe the present economy will continue?

The more information and financing you have in regards to the above, the easier it will be for you to make the superlative decision.

Fixed-rate mortgages and adjustable-rate mortgages are the two primary mortgages types. While the marketplace offers numerous varieties within these two loan types, the first step when shopping for a mortgage is determining which of the two loan types best suits your needs.

The fixed-rate mortgage charges a set rate of interest that does not change throughout the life of the loan. The main advantage of this loan is that it is protected from sudden increases if interest rates rise.

The downside to fixed-rate mortgages is that when interest rates are high, qualifying for a loan is more difficult because the payments are less affordable.

The total amount of interest you'll pay depends on the mortgage term. The longer the term the most interest you pay.

The monthly payment of shorter-term mortgages offers a lower interest rate. This allows for a larger amount of principal being repaid with each mortgage payment, so shorter-term mortgages cost significantly less overall.

The interest rate of an adjustable-rate mortgage varies over time. The initial interest rate is set below the market rate on a comparable fixed-rate loan, and then the rate rises as time goes on.

If the adjustable-rate is held long enough, the interest rate will surpass the going rate for fixed-rate loans. These loans have a fixed period of time during which the initial interest rate remains constant, after which the rate adjusts at a pre-arranged time.

This initial rate enables the borrower to qualify for a larger loan and allow for a lower interest rate to begin with. However, your payment may change frequently and if your loan is large, you could be in trouble when interest rates rise.