First Home Buyers Dilemma A Fixed Or Variable Loan

Dated: 10/11/2017

Views: 378

Most of first home buyers hesitate about Fixed or Variable Rate Loan to choose ?...Well  the answer it's up to everybody's case, there is not rule of thumb . However, :A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest rates change. As a result, your payments will vary as well (as long as your payments are blended with principal and interest).Fixed interest rate loans are loans in which the interest rate charged on the loan will remain fixed for that loan's entire term, no matter what market interest rates do. This will result in your payments being the same over the entire term. Whether a fixed-rate loan is better for you will depend on the interest rate environment when the loan is taken out and on the duration of the loan.When a loan is fixed for its entire term, it will be fixed at the then prevailing market interest rate, plus or minus a spread that is unique to the borrower. Generally speaking, if interest rates are relatively low, but are about to increase, then it will be better to lock in your loan at that fixed rate. Depending on the terms of your agreement, your interest rate on the new loan will remain fixed, even if interest rates climb to higher levels. On the other hand, if interest rates are on the decline, then it would be better to have a variable rate loan. As interest rates fall, so will the interest rate on your loan.This discussion is simplistic, but the explanation will not change in a more complicated situation. It is important to note that studies have found that over time, the borrower is likely to pay less interest overall with a variable rate loan versus a fixed rate loan. However, the borrower must consider the amortization period of a loan. The longer the amortization period of a loan, the greater the impact a change in interest rates will have on your payments.Therefore, adjustable-rate mortgages (ARM) are beneficial for a borrower in a decreasing interest rate environment, but when interest rates rise, then mortgage payments will rise sharply. In conclusion, keep in mind your decision must be based on market interest rate over the time you are moving on and of course how much you can afford according your incomes! 

Want to Advertise on this Site?

Latest Blog Posts

COVID19

Check out the Center for Disease Control and the World Health Organization for more information on how to protect your family and yourself. #healthy #health #thehelpfulagent #houseexpert

Read More

JUST WASH YOUR HANDS

JUST WASH YOUR HANDS Your health and well-being of our local communities around the globe is very important. The World Health Organization (WHO) and the Centers for Disease Control and

Read More

Top 5 Home Design Trends

Top 5 Home Design Trends for a New DecadeWhether you’re planning a simple refresh or a full-scale renovation, it’s important to stay up-to-date on the latest trends in home design. Sellers who

Read More

Do You Have An Entrepreneurial Mindset What Are You Waiting On

Entrepreneur Magazine how many of these entrepreneurial characteristics you have You take action. NOW is “invent as you go.” Forget about over-analyzing and take action, she recommends.

Read More