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Pros and Cons of Fixed-Rate Mortgages

Fixed-rate mortgages are extremely popular among home buyers. Most buyers that use a mortgage to buy a house choose fixed-rate mortgages. Though fixed-rate mortgages are popular, it is important to understand their advantages and disadvantages. A Kansas City Mortgage Company can help you understand what fixed-rate mortgages mean. Understanding the positives and negatives will help you understand your balloon mortgage pros and cons better.

Fixed-rate mortgages are home loans that have the same rate of interest throughout the tenure of the loan. The monthly payment and interest remain the same until the entire loan is repaid.

With each payment, you will be paying off both the principal amount as well as the interest amount. Initially, the majority of the mortgage payment will go towards the interest and by the end of the loan tenure, the majority go to the principal amount.

Fixed-Rate Mortgages – Advantages

  • They are simple. The paper-work for fixed-rate mortgages is considerably less difficult in comparison to an adjustable rate or interest-only loan. As a result, these mortgages are easy to understand.
  • They are predictable. You will always know how much you have to pay towards the loan making it is easy for you to plan your finances.
  • They are secure. A fixed-rate mortgage gives you an idea of how much you will be spending towards your house. And since this amount doesn’t change, there is a sense of security and peace. You need not worry about the ever-changing interest rates.
  • They help you save. Fixed-rate mortgages help you save a lot over the lifespan of the loan. This is especially true if interest rates go up.
  • They are flexible. Fixed-rate mortgages give you a greater amount of flexibility. They rarely come with prepayment penalties. You have to pay whatever is required of you. You also have the option to pay a little extra towards your principal amount. This will help you build equity faster and bring down the amount you pay in interest. You also have the flexibility of paying the extra amount as per your schedule. You don’t have to follow any fixed schedule.

Negatives of Fixed-Rate Mortgages

Fixed-rate mortgages have some disadvantages as well:

  • They have higher interest rates. Most fixed-rate loans have a comparatively higher interest rate than other kinds of loans.
  • They have slower equity. Your equity with fixed-rate mortgages will increase slowly because of the amortization schedule.
  • They are a little too stable. Though your monthly payments will not increase with fixed-interest loans, they will not go down too. With adjustable interest loans, the amount you pay every month will fluctuate depending on changes in interest rates. This means, though the amount will increase if the mortgage rate kansas city goes up, it will also decrease if the interest rate reduces.

With so many advantages and disadvantages, it can get difficult to choose whether you want a fixed-rate mortgage or not. Speak to your Kansas City Mortgage Lender for an understanding of all your options and then make informed decisions about your home loans. 

Metropolitan Mortgage Corporation
7381 W 133rd St #200 
Overland Park KS 66213

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