Fixed Mortgage
Fixed rate mortgage (also known as FRM) is one of the mortgage rates that offers borrowers a same interest rate for the entire term of mortgage.? First time home buyers prefer choosing fixed-rate mortgage program because their monthly payment will remain stable for the entire term of loan which allows homeowners to have a better future budget planning. Unlike Adjusted Rate Mortgage (ARM), the payments are unpredictable since the interest rate changes periodically.? Since the interest rates are usually very low at the beginning, so the payments will start out fairly low. And therefore, the adjusted rate mortgage may be a better option if you are planning to own your home for a short period of time.
Advantages of Fixed Rate Mortgages
30-year Fix Rate Mortgage
A 30 year fixed rate offers consumers the chance to borrow money on a long-term basis without having to worry about the interest rates or payments changing which gives the consumer financial stability. Generally the payment will be lower on 30 year rather than a 15 year loan because the interest is amortized over a longer period, and but you will end up paying more in interest over 30 years than 15 years.
The lower monthly payments that 30 year a fixed rate mortgage offer frees up money that consumers can use to invest, payoff other debt or use to remodel their home to help increase property value. The higher payment consumers pay on 30 year fixed rate mortgage can offer more beneficial tax deductions also, you have to speak to a tax accountant for more details.
15-year Fix Rate Mortgage
15 year fixed mortgages have advantages too. Consumers can build equity more quickly due to shorter amortization schedules and having to pay the loan off faster. Each payment is larger so it frees up more equity. Consumers end up paying a lot less in interest over the course of the loan. Another great benefit that most lenders offer is a lower interest rate on 15 year fixed mortgages.
Fixed rate mortgage are really the most beneficial for consumers who plan on being in their home long term. Whether you are just starting out, new to the area or purchasing a second/investment property then a fixed rate may not be the way to go. You may want to look into an adjustable rate mortgage or ARM to get a lower payment until you decide what you are going to do with the property.
Take your time when researching fixed rate mortgage, know what you can comfortably afford and avoid putting undue stress on yourself by getting surprised on your loan type or payment. Know if your loan will include principal and interest only (PI) or if it includes principle, interest, taxes and insurance (PITI).
Fixed Rate Mortgage vs. Adjustable Rate Mortgages?
Fixed rate mortgage are generally viewed as the safer loan to most consumers due to the fact that they offer a fixed rate and fixed monthly payment for the life of the loan. There are times when a fixed rate may not be the best solution to a consumer?s situation.
Many people who are purchasing a home that they plan to live in for an indefinite length of time will usually opt for a fixed rate mortgage; this gives them the security of knowing their rate will never increase and their monthly payment will remain the same throughout the life of the loan. This allows the consumer to be able to plan their financial goals and plan for the future without the added stress of worrying if their payment is going to increase.
Depending on ?why? you need a mortgage, let?s say it?s for an investment home or rental property that you are unsure if you will keep and rent out, or do some updating so you can sell it and make a healthy return on your investment, then an adjustable rate mortgage might be the better way to go. These types of mortgages allow you to lock in the rate initially anywhere from 1 to 7 years before it will adjust; all lenders have different lock periods for adjustable mortgages, so know what period of time the initial rate will be locked in for.
Adjustable rates usually have a lowest rate compared to fixed rate mortgage because the lender offers the lower rate in the initial locked in period of the loan knowing they stand to gain more revenue when the fixed period of the loan expires and the rate is subject to increase or decrease depending on the market. The adjustments have set limitations both for the highest and lowest that the rate is allowed to adjust. Since this type of mortgage has a lower rate in the beginning, if you are using it to buy an investment property or rental that you are not sure how long you will keep, this may be the more cost effective choice.
The other thing to determine besides a fixed or adjustable rate is the term of the loan. What is a better fit for your circumstances a 10, 15, 20 or 30 year loan. While a 30 year mortgage will give you the lower monthly payment because it is amortized over a thirty year period, if you?re budget allows for a lesser period of time it would save you thousands of dollars and have the mortgage paid off years earlier.
Consumers today have a hassle-free way of finding the perfect fixed rate mortgage for their individual needs right over the internet, right here at mortgage.org! Taking the frustration out of your search for the perfect mortgage is what we are all about. Let us help you today, we can show you the programs that you qualify for and explain the differences so you can make a well informed decision and rest assured that you have made the right one!
