Pros and Cons of a Fixed-Rate Mortgage

Fixed-rate mortgages are mortgages where your monthly payments will always stay the same throughout the life of the loan, which can be helpful in planning for the future. However, fixed-rate mortgages also have the potential to hinder borrowers if the market changes, and can make it more difficult to refinance or take advantage of lower interest rates due to these market changes. 

What is a Fixed-Rate Mortgage?

When you take out a home loan with a fixed rate, it means your interest rate will stay the same, or “fixed” for your entire loan term. It’ll make it much easier for you to plan and budget for the future, as you’ll know exactly how much you need to pay on your mortgage each month. 

However, if you have a fixed-rate mortgage and the market changes, causing interest rates to drop significantly, fixed-rate borrowers may not be able to take advantage of the lower rates. Additionally, if interest rates rise significantly, borrowers may have a difficult time refinancing their fixed loans at a lower rate.

How to Get a Fixed-Rate Mortgage 

There are a few ways to get a fixed-rate mortgage. One way is to go through a traditional lender, such as a bank or credit union. Another way is to go through a mortgage broker. A mortgage broker can work with a variety of lenders and may be able to find a fixed-rate mortgage that is not available through a traditional lender.

The requirements to qualify for a fixed-rate mortgage vary depending on the lender. In general, a fixed-rate mortgage is available to borrowers who have good credit and a down payment of at least 20%.

When applying for a fixed-rate mortgage, it is important to compare the interest rates and terms offered by different lenders. It is also important to read the fine print, as some lenders may have fees or other restrictions associated with their fixed-rate mortgages.

What are the Benefits of a Fixed-Rate Mortgage?

The benefits of a fixed-rate mortgage are that the borrower will know exactly what their monthly payment will be for the entire length of the loan. This can be helpful in budgeting and planning for the future. Additionally, a fixed-rate mortgage can provide peace of mind in knowing that the interest rate will not change during the term of the loan. With a fixed-rate mortgage, your interest rate will never change, so at the end of your mortgage term, you’ll know exactly how much money you paid in interest. 

Are there Drawbacks to Fixed-Rate Mortgages?

One of the biggest cons of fixed-rate mortgages is you may pay a bit more initially than you would for an adjustable-rate mortgage. Because adjustable-rate mortgages have an introductory period with a relatively low rate of interest, they may start out cheaper, but the interest rate may rise and fall throughout the length of your mortgage, meaning adjustable-rate borrowers may end up paying more interest in the long run. With a fixed-rate mortgage, you’ll have peace of mind knowing that your interest rate will stay the same throughout the life of your loan. 

How Long are Fixed-Rate Mortgage Terms?

The most common terms for fixed-rate mortgages are 30-year and 15-year fixed mortgages. Each of these terms has its own set of advantages and disadvantages. 30-year mortgages are the most popular option for the majority of homebuyers. With a longer loan term, you’ll be able to have lower monthly payments. On the other hand, a 15-year fixed-rate mortgage will save you a good deal of interest, but your monthly payments could be up to twice as expensive as a 30-year mortgage because you’ll be paying off the loan in half the time. When deciding the length of your loan, it’s important to consider how much you’ll be able to afford to pay each month, and how much you’d like to spend on interest payments.

Fixed-Rate Mortgages from Six Pillar Lending

Have more questions about Fixed-Rate Mortgages? Six Pillar Lending is here to help. Our mortgage-savvy team of experts can help you get your dream home with the best financing possible. Get in touch with us today to get started.