The wold is in a monetary crises. The credit crunch is affecting the normal family hard, as regular everyday items have gone up in price. Because of the current world financial situation most home owners are turning to home equity loans fixed rate to help with the extra financial burden.
It is difficult for a lot of home owners to decide which home equity loans fixed rate is right for them when it comes to the interest rates charged . In this article we will shine a light on fixed interest.
The name gives it away, fixed interest rates are what they are. The rate is fixed at the time of the loan and will remain constant throughout the life of the loan. Flexible interest loan will fluctuate according to the current market conditions.
One of the clear advantages that a fixed interest rate has over a mortgage solution with an adjustable rate is that no matter how erratic that our financial system becomes the monthly payment will remain the unchanged. It is this characteristic that appeals to a lot of homeowners who are searching to access the equity value of their home. It is much better to plan a home budget when costs remain constant. With an flexible rate equity loan a payment that may have been quite workable at the time of the loan could be a home budget breaker if the prime interest rate begins to rise.
Whilst fixed rate home equity loans have clear advantages they do suffer from disadvantages as well and are as much a two edged sword as their flexible rate cousins. For example, if at the time you initially acquired a loan the interest rate was 7.5 % a fixed rate would be great, provided that the prime rate was anticipated to rise. Nonetheless if a few years down the road the prime interest rate takes a nose dive to say 4.5% you will still be locked in at the original percentage. In this example you would have to refinance the property to get into the lower rate.
Fixed interest rate loan is the favored option for most home owners as the monthly repayments stay static and it is easier to manage. There will be no surprises in the way of raised mortgage payments should the prime interest rate rise suddenly.
When thinking about a home equity loan you should always consult a financial advisor. They will be able to help you determine which type of interest rate best fits your situation and the economic climate. If you are the adventerous type then an adaptable rate might be more your style, if on the other hand you like your life and finances to be steady, constant, and predictable fixed interest is most probably the best bet.
This article has prepared you with a greater understanding of fixed interest rates and home equity loans fixed rate so you are well placed to discuss the options with your financial advisor.