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Fixed Rate Mortgage
How do they work?
The most common type of mortgage program
where your monthly payments for interest and principal never change.
Property taxes and homeowners insurance may increase, but generally
your monthly payments will be very stable. Fixed-rate mortgages are
available for 30 years, 25 years, 20 years, 15 years and even 10
years.
What are the benefits of a
Fixed-Rate Loan?
With a Fixed-Rate Loan, you’ll have one interest rate for the life of
the loan. This means your payment will always stay the same, even if
interest rates go up.
Should I Choose a fixed rate
mortgage?
Granted fixed loans are the most popular
and most stable when rates are concerned but are they the right loan
for you. Lets take a look at a scenario where a fixed rate mortgage
is NOT the borrowers best choice.
Jim and Jane are recently married with no
children at this time, they plan on building a family later on. They
have found a great 2 bedroom starter home that they like and have
signed a contract. The couples plan is to stay in the home for 6-7
years while they build a family.
If you know that you will be in a home for
a short period of time then a long term mortgage is not your best
choice, why have a mortgage for thirty years when you will be there
for only 5? In a situation similar to this, you should consider an
ARM. The types of
adjustable rate mortgages that will work in this situation are
a group know as 3/1 Arm, 5/1 Arm and a 7/1. These loans are fixed
for a specific period of time such as 3, 5 or 7 years after that
period the loan becomes adjustable. The interest rate on these loans
are significantly lower than a fixed rate mortgage.
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Buying A Home
