In Mortgage Finance

Despite the economy, mortgage rates have been making people happier and happier. Fixed rates for a five-year term have become lower throughout the entire year. Fixed rates for a three-year term have also gotten lower throughout the year.

Many people are choosing a five-year fixed rate. However, a fixed rate for a shorter term is always better. It is harder to get approved for a fixed rate on a shorter term, but it is worth it in the end. There are two terms to help in this situation.

The first term is – the stars – this term refers to a one-year fixed term. People have to shop around in order to find this type of term, but it is definitely possible to find. This type of agreement almost always keeps the interest rate at two percent or lower. It is important to keep in mind that buyers of new property are more eligible for a one-year fixed term. Trying to find a one-year agreement on an existing property can seem impossible. This is because there are many switching costs involved.

The second term is – the three-year variable – this term refers to a three-year fixed term. Some people do not want to do a five-year fixed term because that is too long. Other people do not want to do a one-year fixed term because that is too short. A three-year fixed term is right in the middle and is perfect for people who want to give their mortgage rate some time. They will be able to negotiate this rate after a three-year period. This make this term all the more worth it. During these three years, people can reestablish their credit, look for a better home, and even switch insurance companies. This gives people a lot of options, and they will still have a lot of time to spend in the home, too.

One of the not-so-good terms is – the four-year fixed term – it said that the lower the term, the lower the interest rate. That is not so with the four-year fixed term. Any person who has the four-year fixed term will be paying more interest than those with a five-year term. If a person wants more than a three-year term, the five-year term will be the best deal. This will help people save the most money in the end.

The last unpleasant term is – ten-year fixed mortgage – a ten-year fixed mortgage pulls people into something they will have a hard time getting out of. They will not be able to negotiate their interest rates for a whole ten years, or maybe even longer. This will cause many people to give up their home because there will come a time when they cannot afford it. The taxes and the interest rate will be more than the mortgage itself. This is why people should stay away from a ten-year mortgage. This way, they will have a sooner time to negotiate and maybe go with a different insurance company. A ten-year fixed term is second worst next to a four-year fixed term.

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