Understanding Fixed Rates
Second mortgage loans are more popular today than ever.
In fact, many of the mortgage loans that are taken out
in the United States every year are second mortgages.
About one out of four American home owners has one.
Because of the increasing demand, lending institutions
are making many different types of second mortgage loans
available. Some of these loans have a fixed interest
rate and other have an adjustable rate.
If you want to make sure that the interest rate associated
with your second mortgage loan remains constant throughout
the term of the loan regardless of index activity, you
should select a fixed rate mortgage. That is the primary
advantage of choosing a fixed rate loan over one that
has an adjustable rate.
Keep in mind that when you are comparing the interest
rate offered an on a fixed rate second mortgage loan
with that offered initially on an adjustable rate mortgage
loan, the former may often be slightly higher. Remember
that adjustable rate mortgage loans often use “teaser”
rates to attract consumers.
After the initial period of the loan has expired, the
interest rate charged can, and often does, go up. Make
sure your comparison is taking into account the whole
picture, not just the beginning of the loan period.
If you are a very risk-adverse consumer who wants to
protect yourself against market interest rate fluctuations
and make your monthly budgeting easier, a fixed rate
second mortgage loan may be a good choice. As your home
is the collateral for the mortgage loan, you want to
make absolutely sure you are able to afford the monthly
payment, regardless of which financing method you choose.