A fixed home loan is where you are getting one specific percent of interest rate on your home loan. And, you will pay the same interest rate over the period that you are repaying your loan.
Before you choose a fixed home loan, you need to make sure that you know the pros and cons of it. This is the only way to know if you are going to make the right decision or not. Once you choose, you can’t go back and change the type of loan you are getting.
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Pros. No worries of the rates go up
One of the main benefits of a fixed home loan is the fact that you don’t have any worries about interest rates increasing. This does happen a lot, where interest rates on loans increase and then you suddenly need to pay more on your monthly mortgage premium. Now, you don’t have to worry about it anymore.
Cons. You don’t get relief if the rates go down
The problem is that when the interest rates are decreasing, you will not get the decrease as well. Your premium and rates will stay the same. A lot higher than what you actually need to pay. And, you can’t do anything about it.
Pros. You will know what your premium is, every single month
For many people, it is important to have a budget and to plan ahead. This is why it’s important to them to know what their mortgage premium is going to be next month. The only way that you can do that, is to have a fixed home loan. You will know what your premium is going to be for the next 15 to 30 years.
Cons. When the interest rates decrease, you will need to consider refinancing
When the interest rate decreases, the only way that you can benefit from it is to consider refinancing. Yes, many people benefit from a refinance home loan. But, it means that you are starting all over again with your mortgage premiums. Not something that many wants to hear.
With a fixed home loan, you need to think carefully. What is more important to you. To have a mortgage premium that stays the same each and every month? Or, to be able to pay less when the interest rate is decreasing. But, then you also might pay more when the interest rate is increasing. These pros and cons will assist in letting you make the right decision.