Hey there! Eliu from Home Right Lending in Seattle. I get asked this question a lot: What are the top reasons for choosing fixed rate mortgages?
In 2023, there will be a myriad of mortgage options available to choose from and the decision you make will be dependent on your current financial situation and future aspirations. One mortgage option that is available is a fixed rate mortgage, and this has both advantages and disadvantages.
Fixed rate mortgages are advantageous in many ways and continue to remain the most popular way to purchase a home. The fixed rate mortgage offers homeowners the ability to purchase the home of their dreams, with a predictable monthly payment. Here are three main reasons why a fixed rate mortgage should be chosen in 2023.
The first of the three reasons to consider opting for a fixed rate mortgage in 2023 is that you will benefit from having a set rate for the remainder of your loan’s life. This means that no matter what fluctuations occur in the market in the coming years, you will be able to enjoy a stable repayment rate and interest rate. As a result, it makes budgeting easier and helps you to prevent any shocks from sudden changes.
The biggest reason why a fixed rate mortgage should be chosen is that it has the biggest benefit of providing homeowners with the certainty of interest rates. With a fixed rate mortgage, the interest rate of the mortgage is determined at the beginning of the loan and will remain the same throughout the entire term. This allows homeowners to have a predictable monthly mortgage payment, taking the guesswork out of their payments. Moreover, the fixed rate mortgage also protects you from rising interest rates over the life of the loan, giving you the peace of mind and assurance that your payments won't suddenly skyrocket.
The second reason to choose a fixed rate mortgage in 2023 is that they are usually cheaper than variable rate mortgages in the short term. This can help you to reduce your overall payments by making a decision based on your current finances. However, it’s important to remember that a variable rate mortgage might become less expensive than a fixed rate mortgage over time, particularly if the market rates drop.
Another major benefit of a fixed rate mortgage is that the risk of defaulting on it is lowered. This is especially so if fluctuations in interest rates occur. As mentioned above, since the fixed rate mortgage has a set, equal monthly payments over the life of the loan, the chances of mortgage rates increasing significantly is much lower than with an adjustable-rate mortgage. This reduces the risk of defaulting on the loan, which is a great advantage for homeowners seeking to secure a home.
The third reason to choose a fixed rate mortgage in 2023 is the potential for increased stability and security. As the mortgage rate and payments are fixed, your finances remain predictable. This helps to protect you from any sudden changes in the market and can also give you much needed peace of mind. Knowing exactly what your payments and interest rate will be every month also helps you to plan and monitor your budget accordingly.
Finally, fixed rate mortgages have longer amortization periods than other forms of financing, giving you more time to repay the loan. This gives you an increased mobility to pay down the mortgage at your own pace, allowing you to adjust your level of debt and the length of time you want to manage and maintain the loan. This makes the fixed rate mortgage a much more preferred option over variable rate mortgages that often require shorter repayment windows.
To conclude, these are three important reasons why you should consider a fixed rate mortgage in 2023. By opting for a fixed rate mortgage, you could benefit from a cheaper short-term payment, increased security and stability and predictability. However, it’s important to remember that this type of mortgage can become more expensive over time and that it may be best to investigate all your options before making a choice.