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Fixed and Variable Rate on Home Loans

Aug 15, 2008
Everyone want to get the house of their dreams, but again almost all of us have to face the difficult decision of choosing a home loan lender, ok rich people do not need to choose but sometimes luxury houses have mortgages over them too. However, this article is intended to analyze the different kind of home loans you can get, as borrower you need to decide what kind of interest you are going for, a fixed or variable rate? or a combination of both, there are advantages and disadvantages, let review some simple definitions:

Fixed Rate Home Loans

Fixed rate home loans are very simple in their structure, this kind of loan offers to the borrower the advantage of planning his - her finance, because of fixed monthly payments. However, you should consider that this kind of loans are not short term loans, so it is difficult - impossible - to know the market conditions 15 years in advance, for example. It could be healthy, it could be the opposite, then the borrower do not enjoy the benefits and do not suffer the consequences of local or world wide economic changes. If you consider this as peace of mind, then this is for you.

Variable Rate Mortgages

When you got a variable rate mortgage, that means that the interest rate change according to the conditions of the market and it is affected with any treasury bond rate change, borrowers in this case enjoy or suffer lower or higher interest rates, these rates are changing permanently during the loan duration time.

Mixed Version

Then you have the option of start with a fixed interest rate during a certain period of time, and after that apply a variable interest rate according to the market conditions at that time, the advantage of this kind of home loans is that they try to get the best of the 2 systems listed above. You plan your finance for a reasonable period of time, meaning that you have a fixed monthly payment for the next - for example - 5 years, and later on a new monthly payment is calculated accordingly.

Final Words

People trying to get a home loan need to analyze thoroughly every aspect before make a decision, we are not talking about small investments here, after all is your new home or your new piece of real estate. So, consider the pros, the cons and do what is better for you and your family.
About the Author
Hector Milla at http://www.HomeLoansCity.org has listed several Bad Credit Home Loan resources. Visit for further information. Website associated with http://www.Mufatel.com
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