When looking for a loan at the time of buying a new house, you may get confused because several options are available with the banks and financial companies. Their varying interest rates, terms and installments may leave you indecisive about which one to choose. You will feel relaxed when you know about fixed-rate mortgages. The statistics also shown that loan seekers prefer agreeing to fixed-rate loans as compared to others available in the financial sector.
Before making your final decision, it is highly recommended to get the details about these loans and how they can help you.
What is fixed-rate loan?
As the name suggests, the fixed rate loan has constant interest rate till the time you have loan. It is predicable and affordable type of home loan. The loan borrower remains stress-free throughout the loan term because he already knows the money he has to pay. Fixed mortgage has simplified the home borrowing to a great extent and people have realized their dreams of buying their dream house. Every month, a part of payment goes into paying interest while some goes into paying the principal amount.
Pros of fixed loan
A few of the pros of these types of loans are explained below:
- This type of loan is simple for every home seeker. He can easily understand the terms of conditions making it the best choice for him.
- Fixed rate loans are predictable in nature. The payment will not change throughout the loan term.
- Fixed rate loans can be stretched up to 30 years making homebuyers to pay less amount as compared to other loans. He may even invest in other properties at the same time.
Cons of fixed loan
It is equally important to get family with the cons of fixed rate loans. Some of them are mentioned below:
- It has been observed that the interest rates are generally higher which remain constant for the entire loan term than other loan types.
- The total interest when calculated is more than loans with dropping interest rate.
Before you opt for any type of loan, it is strongly recommended to get the quotes from various loan providers. This is because, without comparing them with one another, you will not be able to choose the best and the most affordable ones. These days, you can find all the details on the internet. Many bank sites give out the information through their official portals.