It is quite normal for potential home buyers to look into 30 year or 15 year fixed mortgage rates when considering their monthly repayments. No-one wants a mortgage hanging around their neck forever but with home buyers entering the market later, an early repayment of this loan is important. Although before signing any documents, there are many things to consider. It is important to make sure that the interest rate doesn’t change over the course of the loan.
It seems that some lenders are happy to offer deals that appear too good to be true and they usually are. A 15 year fixed rate mortgage means the interest rate remains stable for the life of the loan. If you are someone that wants a loan with a regular fixed repayment and no additional charges then this is the main benefit with this type of agreement. Both my wife and I decided to research fixed rate mortgages when we started looking at homes for sale.
Even though it was important for us to pay off our loan at the earliest possible opportunity, we didn’t want high, unrealistic monthly payments which we would have trouble maintaining. It became obvious that we had to look at fixed rate mortgages over a longer period and not just 15 year plans. The problem was that we weren’t very happy about having a mortgage close to when we both retired so it was our hope a 15 year fixed mortgage rate would still be available to us. It wasn’t easy for us because of the stress to pay the house off early.
After taking everything into consideration we decided on a 30 year loan instead. Many factors were taken into account when reaching this decision. The most important point was the fact I discovered my wife was having a baby. My wife decided she wanted to raise our child at home so I couldn’t be certain of her monthly financial commitment to our household expenses. The financial commitment per month on the 15 year fixed mortgage rate was just too high. We just decided we would probably get into trouble if we took this route. The monthly payments on a 30 year loan were quite a bit lower.
We found that if we could make a few extra payments throughout each year then it would gradually reduce the principle sum owed. If you make a handful of extra payments throughout a twelve month period you can knock years off of your loan.
Our first choice would have been to go for the short term 15 year fixed rate mortgage solution but this did not help with our more immediate situation. In retrospect, everything worked out ok for us by going down this road.