Fixed
mortgage rates are the safest of all terms in a first or second
mortgage, though they are rarely the lowest at the
beginning.
A
fixed mortgage rate loan might cost you an extra half interest
point at the time of origination, but you know exactly what you
will be paying a year or five years or twenty years down the
road.
Unlike
an ARM (Adjustable Rate Mortgage),
fixed mortgages stay the same regardless of economic
conditions. This kind of loan means that if you are on a
fixed income, you can plan your expenses from year to year with a
bit more certainty. However, fixed mortgage rates are always
initially quoted a bit higher than the lower ARM, simply because
the bank is taking more risk. If the interest rate at which
they are charged goes up, they cannot pass this along to fixed
mortgage holders.
Aside
from having to pay a bit more for a fixed mortgage, the downside
to it is that if rates go down, your payment does not
follow. In order to get a lower rate, you must either
refinance or renegotiate the loan.
