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Monday, December 29, 2008

It takes some discipline, it is well worth it in the long run

By Rem

Many couples looking to purchase a home consider whether a long run fixed rate mortgage would be best for their monthly installments. Currently, many of us are waiting until later in life to purchase a home but still want to have the house payed off as soon as possible. But, before you commit yourself and sign any papers, there are a number of issues you should consider.

One essential point is to ensure that the rate of interest doesn't change during the life of the mortgage. If you are offered a deal that appears to be too good to be true than it in all likelihood is. Loans arranged for a long term fixed rate mortgage keep the same interest rate throughout the entire life of the mortgage agreement. There are no hidden surprises which is great for many people that want a dependable monthly mortgage payment. When my wife and I were looking at homes for sale we decided to look into the assorted loans available with a fixed rate mortgage. Although it was essential for us to pay off our loan as soon as we could, we didn't need high, unrealistic monthly payments which we would have a problem maintaining.

In addition to considering loans for a long term, fifteen year fixed mortgage rate we also looked into loans that spanned thirty years as well. The problem was that we weren't very happy about having a mortgage still running close to when we both retired and hoped that a fifteen year fixed mortgage rate would still be available to us. We were worried about the stress placed on early completion of the mortgage but had to agree it was what we desired as well.

It became manifest that we had to look at fixed rate mortgages over a extended period and not just fifteen year fixed mortgage rate programs. We didn't really like the idea of having a mortgage as we drew close to the age of retiring so we were really hoping to get one of the loans with a shorter fifteen year fixed rate mortgage. There was obviously very good reasons to finish paying the mortgage off earlier if at all possible.

We felt there was a lot of insistence to have the house paid off as soon as possible and for the most part we agreed with this. Discovering my wife was pregnant was the clincher, although this wasn't the only reason we reached this decision. Because my wife preferred to be at home for our child, her financial income would be unsure and unreliable. Also, loans for a fifteen year fixed mortgage rate required a higher monthly payment. For us it just wasn't practicable as we would just be in over our heads and probably be worrying about money every month.

As such the thirty year fixed mortgage rate brought the monthly installments down quite a bit. During the year, if we have some spare cash, we can make additional payments which helps to lower the sum of money owed. By making just a few of these extra installments each year we learned that year's could be taken off the mortgage term. Although this isn't easy to achieve, in the long run it is well worth it. Under other circumstances, we would have preferred to have taken out a mortgage with a fifteen year fixed mortgage rate but we had to consider our other commitments as well. Despite all our concerns, things turned out well for us ultimately and we don't regret our decision.

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