Fixed Rate Mortgages

David · Joined: 19 May 2004 Posts: 754 Location: Atlanta, GA

With interest rates likely to go up over the next year, some would say that you should get a fixed rate mortgage. What do you think?

justin333 · Joined: 13 Aug 2005 Posts: 15 Location: connecticut

Yeah, i would get fixed right now. things look like there about to start rising.

Haplo · Joined: 20 Jan 2005 Posts: 2422 Location: Springfield, IL

We've been saying that for how long? And yet they haven't changed all that much since the day I got in the business.

That being said, the difference between a fixed rate and an adjustable rate has been lessened a great deal. I generally recommend a fixed rate unless there is a good reason for going with a short term ARM. (They are moving in 3-5 years, etc. It's a very high value and the cost difference is worth the lower rate.) For the most part though, fixed rate right now is the way to go.

dsickler · Posted: Sat Aug 13, 2005 5:45 am Post subject:

Regarding fixed rate mortgages. Check out the link listed below.

http://www.mortgageforum.net/viewtopic.php?t=978

It has lot of tips on better ways to handle your mortgage and money. As you may notice, I am very against fixed rate mortgages because they are very costly, and really are a waste of money. But some like the idea of paying more to insure an interest rate. In my opinion, it is the payment each month that really matters.

Besides, if you plan to refinance in a couple of years, then why did you get a fixed rate mortgage that is based on you keeping it for 30 years?

to Justin333
another example; I understand that you are adding an extra $100 dollars to the principle each month, but I would suggest that you take that $100 dollars and save it so that you can earn interest off of it. If you send it to the bank, then they will invest it for themselves instead. Either way, someone is going to invest that money, either the bank or you. So which would you prefer that it be? Most importantly, you will still have access to the money in case of an emergency. the car breaks down, medical issues. If you add it to the principle, then it just get's trapped in the equity of your home. And then if you need it again, you will need to qualify to get it back. I recommend that you keep making the smallest payment you can on the house, that will keep it current. and SAVE the difference. The last thing you want to end up is house rich and cash poor.

Some of the other members on this board might not like that idea, but the worst thing that could happen is that you could struggle trying to pay off the loan as quickly as possible, then all of a sudden something could happend that could put you in a situation where you can not make the payment, and you could lose the house if you don't have any money saved up to make the mortgage payment during rough times. Pay yourself more, not the bank. Sending the bank less and saving more for yourself is truly the best way to end up financially secure.

David
Financial Planner :wink: