Which is better – fixed mortgage interest rates or adjustable rate mortgage plans? 

by amy perry Monday, February 14, 2011
When you take a mortgage for a new home or for developing your existing home there are essentially two options that you have. The first option is to go for the fixed mortgage interest rates while the second option is to go for adjustable rate mortgage plans. You can go for either of them but should do some thinking about the one that suits you better. A little bit of thinking should help.

Normally, a mortgage tenure could range from anywhere between six months to 25 years. in the case of fixed mortgage interest rates the rate of interest remains the same throughout the entire tenure of the loan. However, in the case of adjustable rate mortgage plans the rate of interest fluctuates depending upon different market conditions. While the rate of interest in the former plan will not change under any circumstances, it may either go up or go down in the latter case. If it goes up you lose and if it goes down you gain.

Now which is better for you – fixed mortgage interest rates or adjustable rate mortgage plans? This is something you should clearly think about because you stand to gain or lose a lot depending on what you decide. While it is difficult to predict where the interest rate will go there are some personal indicators that you can use to choose the type of mortgage that is more beneficial for you.

The most important thing to consider is your present job. If you think you have a steady job that will only further your career then you are probably better off going for one of the adjustable rate mortgage plans. If the rate of interest goes up in future you can cover it through your increased income and if the rate falls then you stand to gain through extra savings. However, if your job situation is still a little dicey then fixed mortgage interest rates are better suited for you. You will at least know that you have to pay a certain amount every month and can calculate how much you need to earn to be able to continue the payments.

It is also important to consider the market trends. A couple of years ago the mortgage industry fell flat on its face and caused global havoc. Now the market has almost recovered and people have again started borrowing money for financing their homes. If needed you may ask an expert and take their opinion about the type of loan that is better at this point of time – fixed mortgage interest rates or adjustable rate mortgage plans.

Over the years, the general trend is that adjustable rate mortgage plans are preferred by more people than fixed mortgage interest rates. But let this statistic not influence you. This is just an indicator. At the end of the day it is you who is going to make the payments for your property and you should be the best judge of the course of action that needs to be taken.

Resource Box:
Look into your financial status and then decide whether you want fixed mortgage interest rates or adjustable rate mortgage plans.

General | Categories: financial
0    submitted by amy perry
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