Title:
Fixed Rate
Mortgage Loans - Understanding The Basics
Word Count:
429
Summary:
Fixed rate
mortgages are the most common type of mortgage loan for home buyers. With
predictable payments, long term homeowners can plan their budgets and guard against
rising interest rates. But a fixed rate mortgage is not for everyone with its
higher interest rates and a reduction in your buying power.
Fixed Rate Mortgage Features
A fixed rate mortgage features set rates, long term low monthly payments, and low
risk. Interest rates are determined during your loan app...
Keywords:
Article Body:
Fixed rate
mortgages are the most common type of mortgage loan for home buyers. With
predictable payments, long term homeowners can plan their budgets and guard
against rising interest rates. But a fixed rate mortgage is not for everyone
with its higher interest rates and a reduction in your buying power.
Fixed Rate Mortgage Features
A fixed rate mortgage features set rates, long term low monthly payments, and
low risk. Interest rates are determined during your loan application process.
Rates are set by the market. You can also lower your interest rate by paying
points up front. This option only makes sense if you stay in your home for
several years.
Long term low monthly payments are another benefit of this type of home loan.
Over time, inflation will raise the price of everything except your mortgage
payment. As your salary increases, your mortgage costs will also take a smaller
percent of your income.
The low risk of fixed interest rates also appeals to borrowers. You don’t have
to worry about rising interest rates or a balloon payment. You can also repay
your loan early, saving money on interest payments.
Mortgage Terms
Traditionally, fixed rate mortgages were 30 or 15 year terms. Now lenders offer
a couple of additional options. 30 year loans are still the most popular with
their low monthly payments. A 30 year loan also enables you to qualify for more
than shorter loans.
15, 20, and 40 year mortgages are also options. 15 and 20 year loans qualify
for lower interest rates, but you will have higher monthly payments between 10%
and 15% compared to a 30 year mortgage. Shorter loans also save you interest
costs, appealing to those who want their loan paid off before retirement or
their children go to college. 40 year mortgages are less common, but offer low
monthly payments with higher interest costs.
Biweekly mortgage, as the name implies, requires half your mortgage payment
every other week. At the end of the year, you have made an extra mortgage
payment. You can have your mortgage repaid in 18 to 19 years. Most lenders also
allow you to roll over to a 30 year term with no penalties.
Fixed Rate Drawbacks
Even with their benefits, fixed rate mortgages aren’t for everyone. Alternative
mortgages enable you to borrow more than with a fixed rate mortgage. If you
move in less than 7 years, you will also probably pay more in interest payments
than if you went with an adjustable rate mortgage. Most homeowners move within
the fist 7 years of living in a house. You are also locked into an interest
rate that could drop in the future.