***This post is sponsored by Newcastle Permanent.
Last month, my fiancé and I bought a house.
Like, for real, guys. We really bought a house.
It won’t be ready until November, but the contract’s been signed, and now it’s just a waiting game until it’s built.
Joe and I are beyond excited to have a bigger place…something that’s finally ours.
You know what that means, right? Next step…babies!! Just kidding, babe!
(I’m not really kidding, though.)
But anyway, buying a house has been super fun and exciting.
These days, I’m spending most of my free time on Pinterest trying to get ideas for the house, because let’s face it… I have an IQ of zero when it comes to decorating.
I mean, maybe I’ll just draw some stick people on the walls and call it a day.
Or maybe I won’t do that.
Yea…probably better if I don’t…
But as exciting as this has been for us, it was also extremely terrifying.
Buying a house for the first time was scary and stressful.
I mean, it was and still kind of is a whole new world that I know nothing about, and so I wanted to make sure that I knew what all of our options were, and that I understood all the terminology being used.
What the heck is escrow?
Every time I met with my mortgage company, I felt like a total idiot.
So I thought it would be helpful to give you guys some info on two of the most popular home loan options, so that at least you have a bit of knowledge on THIS particular topic when it comes time for you to buy a house.
Here’s what we’re looking at…
Fixed Rate vs. Variable Rate Home Loans
With a fixed rate home loan, your interest rate and your repayments stay the same for the set period of time that you’ve signed your life away for. So if your loan is for 15 years at an interest rate of 4%, you’ll be paying your mortgage for 15 years, always at a rate of 4%. No surprises here.
So what are the benefits?
Well, your monthly payments are consistent, so you can budget your home expenses accordingly. Also, if you’re buying at a time when interest rates are low, you lock in that low interest rate and even if the interest rates go up in the future, you’re still locked in at your lower rate. Continuing the example from above, if your 15 year loan is at a fixed rate of 4%, and 3 years from now the interest rates skyrocket to 10%, you’ll be sitting pretty at your 4% and everyone around you will be super jealous.
What’s NOT so great?
Well, often times your monthly payments will be higher than with variable home loans. Also, if interest rates by some miracle go down in the future, you’re pretty much stuck with your original interest rate.
With a variable rate home loan, the market and economic climate are basically what determine the amount of interest that you pay.
Well, monthly payments are usually cheaper than with fixed rate loans. So if you’re planning to keep the loan for a short period of time, and you’re comfortable enough with your finances to take the chance that your payments may go up, this could end up saving you money in the long run. It’s a gamble that could potentially pay off.
You have ZERO protection against interest rate changes. So if interest rates suddenly go up…BAM!! Congratulations, you now owe more money. Because of the fact that your payments can fluctuate, it’s also a bit more difficult to budget your expenses on a monthly basis.
Joe and I ended up going with a fixed home loan, because I’m the kind of person who likes having the stability of knowing exactly what I owe each month.
But regardless of your decision, make sure you do as much research as you can. And when it comes to buying a house, be super annoying. Ask a ton of questions. Because this stuff’s important, and it’ll impact you financially for the rest of your life.
Lucky for us, there are companies out there like Newcastle Permanent, who are more than happy to answer all of our annoying questions.
***Although this post is sponsored, all opinions are my own.
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