Given that a home is most likely the most significant investment you’ll ever make in your life, it’s worth getting it right the first time around. And given that an average house costs hundreds of thousands of dollars, you’re likely to need a mortgage.
The key to successfully owning your home free and clear depends on your ability to pick the best mortgage plan to finance your purchase. The type of loan you choose influences the final price of the house. Primary Residential Mortgage, Inc. explains the incredible benefits that come with a fixed rate home mortgage.
Predictable Monthly Payments
As the name suggests, the interest rate on this loan type is fixed, usually for a definite period ranging from 5 to 30 years. You lock in the interest rate, shielding you from any changes on the prevailing market rates. For instance, if your lock-in rate is 3%, the rate will hold even when the current interest rates climb to 5%.
The trick here is to lock the rate for the entire loan period. You can opt to lock in the rate for a specific period, after which the prevailing market rates apply. If the rates are lower than your current rate, you get to save some money.
Build Equity Quicker
If you’re keen to build equity in the home quickly, a fixed rate loan is the way to go. Each monthly payment that you make pays off some of the interest and loan principal. Initially, the interest makes up the bigger portion part of each payment, but that tapers down after a few years, after which the principal amount increases.
Better yet, most lenders won’t impose a fine on making additional payment each month to pay off the loan quicker. You can have that extra payment that is going to repay the principle and build equity in the home.
Securing the perfect home loan works well in realizing your dream of owning a home. Therefore, you need to examine the merits of various mortgage plans and pick one that best meets your needs.