Whether or not you’re new to the housing market, you’ve likely heard about low interest rates and are wondering what kind of impact these can have on your mortgage. Both fixed and adjustable-rate mortgages have their benefits and drawbacks, but what will work for you depends on your financial health and knowledge of the real estate market. If you’re currently comparing the pros and the cons of each, here are some pointers on how they can impact your home purchase.
The Security Of A Known Rate
With the relatively low interest rates of the last few years, many people can be enraptured with the idea of a variable rate mortgage that may save them money. However, while a variable rate mortgage can certainly provide a benefit if low interest rates remain in place, a fixed rate can provide the homebuyer with the economic security of knowing exactly what their rate is for the entire length of their loan period.
A Lower Mortgage Cost
It goes without saying that there’s a strong benefit in knowing exactly what your mortgage payment will be each month. However, while a fixed-rate mortgage can offer this assurance, an adjustable-rate can actually end up costing you a lot less in the long term. Since mortgage rates will fluctuate over the term of your loan and a lower interest rate means a lowered monthly payment, this can result in a more economical price tag when it comes to your biggest investment.
How Market Savvy Are You?
Many homebuyers feel confident enough in timing the market and getting a good price that they aren’t as concerned with the choice between an adjustable and fixed-rates. However, if you’re not savvy when it comes to the real estate, deciding on a variable rate can make a monthly payment difficult if you’re already pushing your financial capabilities. Instead of making a rash decision, ensure you’re aware of your flexibility before deciding which rate option to choose.
There are a variety of benefits on both sides of the equation, whether you choose a fixed-rate or an adjustable-rate mortgage. However, what works best for you can depend entirely on your economic situation and your loan period so it’s important to consider all the variables before making a decision. If you’re currently on the market for a home and are considering all your options, you may want to contact one of our mortgage professionals for more information.