When you are getting a mortgage loan it is important to have as much information as possible and to be prepared in every way that you can be. In light of that we will continue with our series on addressing common mortgage issues.
A Fixed Rate Is Not Always The Best Way To Go
Home loans are as individual as the people who get them. Your home loan needs will differ greatly from what your neighbors needs are. The decision to get a fixed-rate loan or a variable loan is one that needs to be carefully considered and all the options need to be weighed. Many people have begun to have the mentality that fixed rates are the best and that variable rates should be avoided like the plague. This is not true. Fixed rates are calculated by capital markets over the period for which you agree to be it three, five, seven, ten, or even twenty years. You will be locked into that payment fee throughout the life of the loan. If the variable interest rate goes down during that time you will still have to pay whatever the rate is that you signed on for. So you could in fact end up paying more for a fixed interest rate if the rate goes down. This of course goes both ways and if the interest rate goes up and you have a variable interest loan then you will of course be paying more. Really the best advice is to look over all the facts and figures and determine which rate will work best for you and your family.
You Can Not Add Personal Debt To Your Home Loan
Many new home buyers would like to be able to add in all of their personal debt such as car payments, student loans, credit card bills and other outstanding bills into their home loan and have one lump sum to worry about. In theory it sounds pretty good. Just one payment to worry about each month. But in most instances this can not be done. Most of the time the property needs to build some equity before something like this can happen. After some equity has accumulated on the property all the debt can be rolled in together if you so choose.
Sean Rasmussen
Property Options Australia
Property Options Blog © 2006 – 2008
Hi Sean,
Personally I like a fixed rate because I know how much I have to pay each month and that it won’t change. Sure, it may go down but it’ll be a lot more stressful when it goes up.
Also, I really think you need to reduce as much of your personal debt as you can before getting a home loan. You want to keep the equity to make improvements to the home to increase its value. Not to offset personal debt.