> My question is: why would you fix for 30yr when you know you're paying multiple points to offset market uncertainty?
To fix your monthly payment for the next 30 years.
Furthermore, with a fixed rate mortgage you can benefit from interest rate volatility since you can always buy back the debt at par. In practice this means you can:
1. Take out a fixed rate loan for $n at x%
2. If the rate doubles (to 2x%) you can refinance and you now only owe half ($n/2)
3. If the rate falls to x% again you can refinance again and now you owe the original amount ($n/2) at the original rate (x%)
This ignores the cost of refinancing the loan, so you’ll be paying some fixed sum for that (which is lost), but if rates moves sufficiently this is a huge benefit that you don’t get with a variable rate mortgage loan.
* This is based on how the Danish Realkredit mortgage works. I’m not certain, but I believe fixed rate mortgages work the same way in other countries.
To fix your monthly payment for the next 30 years.
Furthermore, with a fixed rate mortgage you can benefit from interest rate volatility since you can always buy back the debt at par. In practice this means you can:
1. Take out a fixed rate loan for $n at x%
2. If the rate doubles (to 2x%) you can refinance and you now only owe half ($n/2)
3. If the rate falls to x% again you can refinance again and now you owe the original amount ($n/2) at the original rate (x%)
This ignores the cost of refinancing the loan, so you’ll be paying some fixed sum for that (which is lost), but if rates moves sufficiently this is a huge benefit that you don’t get with a variable rate mortgage loan.
* This is based on how the Danish Realkredit mortgage works. I’m not certain, but I believe fixed rate mortgages work the same way in other countries.