The fixed rate mortgage has a long history and is considered the standard of home loan financing instruments. Long before the adjustable rate mortgage came along the fixed rate mortgage was being used and is still being used by many home buyers. There is a reason for that loyalty.
One of the major advantages to using a fixed rate mortgage is that home buyers know almost to the penny what their monthly home payment will be over the course of the loan. This is in stark contrast to how adjustable rate loans act.
Along with the knowledge of what the monthly home payment will be during the course of the loan, fixed rate mortgage borrowers also have more emotional security than those using ARM’s. A borrower under an adjustable rate mortgage may have no idea what the payments for the home will be in future and, in some cases, this can lead to huge problems later on. Some ARM interest increases can be so high that the home owner cannot make the payment and may have to go into foreclosure, losing the home and the equity that has been built up in the home. Fixed rate borrowers seldom have to face this dilemma.
One of the disadvantages to a fixed rate mortgage...
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