Fixed Rate Mortgage Deals

Fixed rate mortgage deals are some of the most common types of
home mortgage deals available in the USA. They are very easy to understand and set
up and help people know exactly what type of commitment they are making financially. They have one main benefit over all other types of mortgages. Stability of mortgage installment payments. No matter how high interest rates rise, the borrowers are  guaranteed the same payment each month for the entire terms of their mortgages.

 This really helps people in planning their expenses for their entire month and budget out their income. These kinds of mortgages are ideally suitable for lower income families who do not have other sources of income or savings to fall back on, in case the rates rise beyond their means.

Fixed rate mortgage deals are also suitable for people who are conservative in their attitude towards their finances. If you do not trust the stock market and generally avoid riskier investments, then fixed rate mortgage deals would probably appeal to you. As the payments don’t change,  you are in a much better
position of being able to save up money for lots of other desirable things like better furnishings, enhancing the value of your home through, for example, constructing an extension, beautifying it or simply taking the family on a great holiday. 

Fixed rate mortgage deals are also good for people who have to move a lot because of their jobs but do not want to sell their homes as the postings are only temporary. It helps to keep the costs low and the home could be let out on a short let for extra income.

However, the biggest advantage of a fixed rate mortgage is that inflation does not affect your installments. In fact, inflation would actually reduce your installment in real terms while your income, presumably, would go up in line with the cost of living.

Most fixed rate mortgage deals also allow for enhanced payments to shorten the mortgage term. On the right deal you may be able to shorten the term by as much as 7 to 8 years. When paying back more than the agreed installment, you are not only paying back more of the original loan but also cutting down your long term interest cost.

In the USA, most common fixed rate mortgage terms are 15 and 30 years, however, 20 and 40 year terms are also available. The term you should choose would depend entirely on how much you can afford to pay per month and how big a house you want. If you are looking for a small house, a 15 year term would build up equity in your house faster. If you have a big family and need a larger home, then you would need to decide whether you can afford the higher mortgage installments on a 15 year term or that you would be better off with a longer term and lower installments.

In summary, fixed rate mortgage deals have their advantages like stability of mortgage payments and immunity to inflation but they also have a couple of disadvantage. Should interest rates fall, you would not be able to take advantage of the lower rates and the longer fixed terms carry  higher interest rates.

At the time of writing this article, (30th September 2008), there is a strong possibility that interest rates may go down, so it would be wise to wait over the next month before making your move. There is plenty of free information available on the net, so do your research and then after the Fed has announced the rate, decide which fixed rate mortgage deal is right for you.

I would appreciate any comments you have on this article.

Zeke