If you strive to become a first-time homeowner, one of the decisions that you'll need to address is what type of mortgage you use to buy your new home. One common mortgage loan is known as the fixed-rate mortgage. A fixed-rate mortgage is a loan product with a pre-determined term, interest rate, and payment. These details remain the same over the life of the loan. Check out a few reasons first-time homebuyers should opt for a fixed-rate mortgage.
1. A Fixed-Rate Mortgage Allows for Predictable Monthly Payments
As a first-time homebuyer, you'll quickly discover there are a lot of expenses associated with owning a home, like property taxes, insurance premiums, home repairs, and yard maintenance. If you're not used to paying for these items, they can put a strain on your budget.
However, a fixed-rate mortgage ensures that one of your largest expenses (your monthly mortgage payment) remains consistent. You won't have to worry about your payment increasing due to interest-rate fluctuations. This makes it easier for you to adjust your budget to account for other unaccounted expenses. If your income increases over time, your predictable monthly payments become even more affordable.
2. Fixed-Rate Mortgages Have Affordable Interest Rates
Another benefit of fixed-rate mortgages is that they conventionally have low, affordable interest rates. The lower your loan's interest rate, the lower your monthly mortgage payment. As a first-time homeowner potentially concerned about home affordability, a low monthly payment is beneficial.
3. You Can Choose a Fixed-Rate Mortgage Product That Suits Your Needs
Fixed-rate mortgages are available in a slew of different products, making it easy for you to find one that suits your finances and personal preferences. There is a wide variety of term lengths and downpayment requirements for fixed-rate mortgages.
For example, while the 30-year fixed-rate mortgage loan is a common choice for first-time homeowners due to the low monthly payments, fixed-rate mortgages are also available in 40-year, 20-year, 15-year, and 10-year terms. If you want to pay your mortgage off before you retire or take on an additional expense (like college tuition or monthly daycare), a shorter loan term is ideal for paying your mortgage off on a shorter timeline.
There are a lot of mortgage programs that require a low downpayment. These lower down payment requirements are perfect for first-time homeowners who don't have a large sum of cash to use for their home purchases. Reach out to a fixed-rate mortgage lender to learn more.