First-time homebuyers are better off making stable monthly mortgage payments throughout the entire term of the loan. Typically, fixed rate mortgages remain the same whether it’s a 15, 20 or 30 year mortgage. They allow for predictability in one’s monthly housing costs.
Fixed rate mortgages have several advantages:
- You get inflation protection in case interest rates increase because you won’t be affected
- You get to plan long term for other expenses and goals because you know how much your monthly payments will be for the entire term of your mortgage
- You lower your risks because you know what your mortgage payments will be regardless of the current interest rate
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When you refinance, you take out a debt obligation with new terms to replace an existing debt obligation. Refinance mortgages are commonly taken out for home loans. Refinancing works for the borrower when the interest rates are low. Money that goes into higher interest charges can go into payment of the principal loan. Some refinance their mortgages when they find monthly dues too stiff to handle.
Refinancing will in effect change any of the loan components. It can reduce interest cost, extend the repayment time or reduce periodic dues. Monthly payments will be reduced if you get a low interest rate or when the term is extended but it means paying more in total interest over the life of the loan. It is really up to the borrower to decide what will work for him.
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Back when you were a college student, you have dream of having a good life. That includes having a comfortable home. And with a good job and a good amount of cash in the bank, you hoped for a time when you can afford everything you need. You are not wishing for an extravagant life that can give you a mansion and five cars. You just wanted a nice comfortable home that you can call your own.
And now that you have a very good job and some money in savings, you think that it is time for you to realize your dream. You look for a nice house in an area that you like. And finally you think you have found it. But you have to make sure that with what you make you can pay for the mortgage. You can use amortization calculators to help you out with this.
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