Fixed Rate Mortgage: What Is It and Should I Get It?

Fixed rate mortgages are loans which have an interest rate that you and the lender agree upon that will last the life of the loan. It is just one of many types of mortgage loans available and is among the most popular. The counterpart to fixed rate mortgages is Adjustable rate mortgages also known as ARM. Fixed rate mortgages tend to have a slightly higher starting interest rate than adjustable rate mortgages

Just as the economy and housing market fluctuate so do the interest rates. When the government raises it's interest rates they lend to banks with the banks in turn pass on tha cost to the consumer and vice versa. Even though fixed rate mortgages may have a slightly higher rate than the introductory rate of an adjustable rate mortgage it can be very advantagious to lock in a low fixed rate. Imagine interest rate on a fixed rate is 5.5% annually while an adjustable is 4.75%. Over the first few years the adjustable may save you some money, but once rates go up, as they surely do, your adjustable rate mortgage can go to 9, 10, even 15% while the person with the fixed rate happily pays his or her 5.5%.

If you plan on keeping the home for the long haul and we are in a period of low interest, a fixed rate mortgage is much better to have than an adjustable rate mortgage. Adjustable rate mortgages can be used as a tool for a borrower who plans on selling the home within a few years, repairing and flipping the home, or simply paying back the mortgage very quickly.

All in all Fixed rate mortgages are highly recommended to the average home buyer because they are safe. It's better to be safe than sorry when dealing with what most people consider to be the biggest and most important purchase in their lives. So lock in those interest rates and enjoy the fact that you don't have to worry about your bills going up every month, but most of all enjoy your new home!