A fixed rate loans is a loan in which the interest rate charged remains fixed for the loan’s entire term, no matter what happens with interest rates. With a fized rate loan, the payment is unchanged for the life of the loan. Whether or not the fixed rate is best for you depends on a number of factors.
If you opt to go with a fixed rate loan, your rate will be based on the prevailing market interest rate, plus or minus a spread. Many borrowers pursue fixed rate loans when interest rates are low but may increase within the foreseeable future. This ensures a relatively low payment compared to what may have happened had the rate gone up significantly. On the other hand, if rates are higher but may come down in the foreseeable future, a variable rate may result in paying less. Depending on the terms of your agreement, your interest rate on the new loan will remain fixed, even if interest rates climb to higher levels. On the other hand, if interest rates are on the decline, then it would be better to have a variable rate loan. As interest rates come down, so will the interest that you pay.
Rather than stress over the best type of loan for you, why not speak with one of the experts at EHLFunding? We make it our business to provide our clients with the information they need to make the best choice for their situation.