OK, why should a fixed rate mortgage be the one for you? In short you get to sleep soundly at night for a fixed number of years.
We are in a period of ups and downs in the world economy. At the moment we have low rates but how long this will last is anybody’s guess.
In our recent past the mortgages rate went up in a very short time by over 10%. What this meant to homeowners on a single variable rate mortgage was their payments more than doubled in a few short months.
You may be able to take that better than me but that would frighten me to death. Having to pay more than double the original payments. The other worry is if you can’t find the payments you risk losing your home altogether.
Can we avoid this potential pitfall? Yes with a fixed rate mortgage. With it you get a period of years where the rate is fixed and your payments are also fixed.
You know what you are going to pay regardless of wild interest rate highs and lows. When the rates more than doubled, those with fixed rate mortgages were thanking their lucky stars.
If there were to be a big rate rise there would be lots of people you know finding it really hard to make the payments. With some getting into a serious financial hole.
What other benefits come with a fixed rate mortgage? As well as the security of payments you generally get it with a discounted rate. So it means you are borrowing at slightly discounted rates.
There are a few negatives to them though. For instance if there’s a swift drop in rates. Here you would be paying a bit more than other people.
Having said that, you are happy with the initial fixed rate mortgage deal. So it should be easier for you to stomach a drop in rates, rather than a rise in rates.
If the rates drop, the worst that can happen is you pay a bit more than others. However the other way round and a swift rise has other people potentially having their homes repossessed.
In conclusion, despite the small dangers I would go with a fixed rate whenever I could. For me, the small dangers are far outweighed by the huge benefits of a fixed rate mortgage.
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