Mortgage payments are long-term commitments, especially for those who opted for a 30-year term. While some may be on the lookout for the lowest interest rate, there may be times when going for higher payments can provide you with more advantages in the long run. Should you consider paying higher for your mortgage?
The answer is yes, but this definitely depends on the circumstances and different factors. As previously reported on Realty Today, searching for the best rate from several lenders is a wise move, especially if you are on the lookout for the best offers.
However, searching for the best rate may also entail that you are being offered the adjustable rate mortgage or ARM. According to Realtor.com, more often than not, mortgages with the lowest interest rates are attached to an adjustable rate mortgage or ARM.
While having low-interest rates under this term will initially save you a couple of bucks, this may cause you more headaches in the long run. The publication notes that ARM can only offer low rates for the first five or seven years of your loan. Anything beyond that will have to depend on market indexes, which could spell higher payments later on.
It would, therefore, be better to go for the fixed-rate mortgage and pay higher on your mortgage if you wish to have constant interest rates.
"Borrowers may choose to pay the higher rate on the fixed-rate mortgage because it gives them the peace of mind to know that the rate isn't going to change," said senior vice president of Guaranteed Rate, Michelle Bobart.
The publication also notes that closing costs may also be added to the monthly mortgage payment if the lender offers this kind of agreement.
Private mortgage insurance is also advisable, especially for those who wish to have a fall back option in case things do not work out according to their plan. Those who are unable to pay for a 20 percent down payment are also currently being required to take PMI to protect the lender in case you default on your loan.
