After a long period of dropping to historic lows, mortgage interest rates in America have been rising incrementally as of late. According to Freddie Mac data, the fixed rates of 30-year of home loans jumped from 3.95% to 4.46% from January through early March 2018.
If you’re planning to take a fixed-rate mortgage, ask yourself this: does it make financial sense when mortgage rates are heading north? While the ultimate answer depends on your situation, don’t rule it out immediately just because home loan interest across the board is becoming costlier. Unlike adjustable-rate loans, fixed-rate mortgages offer can these unique benefits:
Enjoying Peace of Mind
The biggest advantage of mortgages with fixed rates is a sense of security, notes Primary Residential Mortgage, Inc. Locking a specific interest rate throughout the life of your loan means you can tell exactly how much you will pay every month. Your mortgage rate will be immune to market forces, allowing you to budget for your monthly housing payment more easily. By knowing how much you owe to the last penny, you won’t get bill shock.
Saving on Interest over Time
If the mortgage interest increases over time, a fixed-rate home loan can protect you from paying more. It’s true that you’re likely to pay more initially than what borrowers of adjustable-rate mortgages would because of their discounts. But if interest rates rise significantly down the road, you’d get to keep more money in the pocket.
Using Inflation to Your Advantage
Even if the value of your dollars dropped as time passes, your monthly mortgage payment would remain the same. In other words, it would seem less costly with inflation. If your income increases in the future to compensate for money value reduction, your fixed housing payment would then become more affordable.
Fixed-rate mortgages aren’t for everyone. But if you like security, applying for one is the sound route to take.