Planning to buy a house? Do you have sufficient cash in your wallet? Most people will say no to this question and thus, there arises the need to take out a home mortgage loan. There are several kinds of mortgage loans available in the market.
In a fixed rate mortgage, you make a fixed monthly payment throughout the loan term period. For an adjustable rate mortgage, you make the payment according to the market condition. As such, you may pay low interest rate initially but will have to pay high interest rate in future. With the help of a mortgage calculator, you will be able to understand “how much mortgage can i afford” and, as such, take out a home loan that suits you the best.
Fixed rate mortgage is the right option for you
It is seen that while buying home for the first time, most people prefer opting for fixed rate mortgage loan. This is because they know that in this type of mortgage loan, the interest rate and the monthly installments will remain the same throughout the loan repayment period. As such, there is no risk factor involved with this kind of loan and they’ll also not have to worry about making the monthly payments. So, even if the homebuyer faces financial worries, he’ll be able to cope up with the mortgage payments and thus, repay the home loan on time.
Pros and cons of fixed rate mortgage
Below are discussed the pros of fixed rate mortgage:
1) You can take out a fixed rate mortgage for a long time period. Since the interest rate remains fixed in this type of mortgage loan so, you need not have to worry about the mortgage payments. Your payment will remain the same throughout the term period of the loan.
2) This type of loan helps you calculate the amount you’ll have to pay every month against your loan. As such, you need not have to worry about increase in the payments.
Check out to know the cons of fixed rate mortgage:
1) In case, the interest rate falls in the market, you’ll not be able to get any benefit since the rate of interest will remain fixed in this loan.
2) You have to pay a certain amount of fees in case of fixed rate mortgage so that you can fix the interest rate of your mortgage loan that you’re taking out.
Adjustable rate mortgage is the right option for you
Even though the interest rate fluctuates according to the mortgage market in adjustable rate, it is a smart decision to choose this type of loan. In case, you want to resell your home, opting for adjustable rate can be considered to be a suitable option. An adjustable rate mortgage can also be beneficial for you if your monthly income increases from time to time. You get the facility to make low payments on your mortgage at the initial stage and you also get to know whether or not you’ll be able to make high payments in future when the rate will increase. The low mortgage payments at the beginning may look attractive from the buyer’s perspective but you need to keep in mind that the high interest rate will increase your payments. This, in turn, will force you to come out of your estimated budget.
Pros and cons of adjustable rate mortgage
Read on to know the pros of adjustable rate mortgage:
1) Home buyers are attracted to adjustable rate mortgage due to the low cost of the mortgage initially. Usually, you’ll find that adjustable rate mortgage start with low interest rate that allows you to make reasonable payments. You may use a calculator to understand what amount you’ll have to pay every month from your income.
2) The lender makes it a point to check your income and credit history before approving your mortgage loan. Even though your credit score is poor, you may qualify for adjustable rate mortgage. You’ll then have to high interest rate on your loan. Some homebuyers consider adjustable rate mortgage as their only choice when they want to take out a mortgage loan
Here are discussed the cons of adjustable rate mortgage:
1) In case of adjustable rate mortgage, the payments may be low initially but it may increase all of a sudden depending upon the mortgage market. You’ll then have to make high payment on your home loan.
2) Although you may know when the interest rate in the market will increase, you cannot guess by what amount it will increase exactly. In case, your income does not increase as per your planned budget, you may find it difficult to make the payments on your home loan.
So, if you are all set to fulfill your long awaited dream, make sure you take out the right mortgage loan and buy your own home. You will be able to repay the loan amount on time.