There are many different types of home loans out there today that you can choose from, the goal is to find the right loan for you and your needs. It can be quite confusing and overwhelming at times which is why this list has been put together to lend a helping hand for those who are interested in getting the home of their dreams.
The difference between a fixed rate home loan and an adjustable rate home loan:
An adjustable rate home loan or a variable rate home loan is a loan where the interest rate you are being charged on your outstanding balance changes based on market interest rate changes. Whereas a fixed rate home loans is where your interest rate on the unpaid balance remains the same as it was on day one. It will not change based on the market interest rate changes.
As with anything in life, there are pros and cons of everything, and fixed rate home loans is no different.
Pros of a Fixed Rate Home Loan:
- You know your payment every month, predictability is a major bonus for this type of loan, no one likes surprises at least not when it comes to the amount you need to pay for your home loan.
- You have options to keep the loan for longer, rather than just a 10 or 15 year loan with the fixed rate home loans such as from NPBS you have the option for a 15, 20 and even 30 year loan repayment plan. This helps to lower the monthly payments.
Cons of a Fixed Rate Home Loan:
- While the stability of a fixed rate home loan is a bonus this stability comes at a price, that price is the interest rate. While keeping the same payment over the course of the loan is ideal, your interest rate might be significantly higher when you opt for a fixed rate loan over a variable or adjustable rate loan.
- While a lower monthly payment and longer time to pay could be beneficial you also have to remember the longer you pay on your loan the more you pay in the long run. Instead of a $60,000 loan to cover the cost of your home your loan would look more like $100,000 or more to factor in the interest for all 30 years of the loan.
These are just a few things to think about when choosing between a fixed rate home loan like the ones offered from NPBS and the adjustable rate home loans, each situation will be different and each potential home owner will have different needs and wants so the best thing to do is to research things on your own and talk to a financial advisor to see which type of home loan is best for you.