Understanding where risks lie and what needs to be done to reduce risk is an important part of the process of financial decision-making. For example, you need to know not only where the break-even point is, but also how and when it will be reached.
Reducing business risks
Reducing the risk inherent in business decisions is rarely a linear process. Instead, it is best achieved by applying principles and techniques appropriate to the specific situation and risk. Several of these techniques are outlined below.
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Once upon a time, a fixed-rate mortgage was the only real option. It may have taken some folks a few years to get to the point where they could qualify for one, but once they did, they were in a good, predictable situation.
In essence, a fixed-rate mortgage has one interest rate for the entire life of the loan. While this interest rate may not be as low as the adjustable-rate mortgages that have contributed to the housing crisis, it’s predictable. Owners are not likely to be caught off guard.
Most fixed-rate mortgages have either 15- or 30-year terms, but are often “refinanced” or replaced, with other fixed-rate mortgages when interest rates decline. It’s likely that homeowners will need to try and convert their adjustable-rate mortgages into a fixed-rate mortgage. That stability is key to diverting money to take care of other kinds of debt.