The Drawbacks of a Fixed Rate Mortgage

There are several drawbacks associated to choosing a fixed rate mortgage. These are some of those disadvantages:

1. If you secure your mortgage while interest rates are high, you will be stuck with a high interest rate throughout the duration of your mortgage.
2. To take advantage of falling rates, you’d need to refinance. That can mean a few thousand dollars in closing costs plus the time it takes to prepare the documentation for the new loan.
3. Fixed rate mortgage can be too expensive for some homeowners since they carry a higher initial rate. That means that by choosing a fixed rate mortgage, you may not be able to use as big of a house as if you choose an adjustable rate mortgage.

A fixed rate mortgage may not be a good idea when you are considering moving to a different house within a few years or interest rates are expected to drop in the coming months or years.