Owning a home is a significant milestone in your long-term financial development journey, and it demands informed decision-making at every step. One of the decisions is whether to opt for a fixed-rate or an adjustable-rate home loan. The best choice for persons owning a home for the first time is a fixed-rate loan, even in cases where its interest rate is higher than that of an adjustable-rate loan, and we’ll tell you why.
Read on to learn the benefits of fixed-rate home loans.
Fixed-rate mortgage loans offer predictability and stability during repayment, which makes planning finances easier because repayments remain the same throughout the life of the loan. With a guarantee that your payments will not change, it’s easy to budget long-term. Even if the economy shifts and interest rates increase, your debt responsibility remains unchanged. This consistency and predictability give you peace of mind.
Adjustable interest rates rise as interest rates go up, but with fixed-rate home loans, you’re shielded from the impact. It’s a great way to lock in a low interest rate and save money in interest costs over time. If the interest rates are low but it’s speculated that they’re about to increase, get a fixed-rate home loan quickly to secure the current low interest rate. You’ll be protected from market fluctuations and can plan your finances long-term without worrying about unexpected changes.
Fixed-rate mortgage loans are easy to understand, and their interest calculations are straightforward. There are no surprise variations to make room for, and what you owe is apparent as early as during the loan origination. The uncomplicated approach is attractive, especially when buying your first home because it makes planning your financial future easier.
Fixed-rate mortgage loans help to lock in lower rates, but if the rates drop further and you’re stuck with a higher interest rate, you can refinance to a cheaper loan. Refinancing lowers your lowest interest rates and gets you the most flexible repayment terms possible. Therefore, with fixed-rate home loans, if the costs allow, you can always switch to cheaper deals until the loan is fully repaid.
The way to know if a fixed-rate mortgage is the best choice for you, particularly when buying your first home, is to think about your long-term financial plans. Are you planning to move to your new house permanently? This type of home loan is popular among people looking to stay in their homes for many years and enjoy the stability and peace of mind of having predictable payments.
Risk-averse homebuyers also prefer fixed-rate home loans. If you prioritize financial security over the risks of an adjustable mortgage, a fixed interest rate may be the best borrowing option.
If you anticipate an interest rise in the coming days, you may also prudently lock in a low fixed interest rate before the loan costs increase. A low interest rate in the face of rising borrowing costs helps you save money; when the interest rates fall, you could look into refinancing or debt consolidation.
The path to buying your first home can be challenging. You’re new to the real estate market and are bombarded with many new concepts and options, including choosing between a fixed- or adjustable-rate mortgage loan. The best choice is the fixed-rate mortgage loan for its stability in the face of rising interest rates and the potential to save you money in the long run. You’ll also likely have an easier time budgeting and planning your financial future when your repayment is predictable. For more information, visit our Mortgages page.
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