If you are in the market to buy your dream home, you may want to consider a fixed rate mortgage. The interest rate on a fixed rate mortgage remains unchanged throughout the term of the loan, which means the amount of your monthly interest and principal payments remain the same for as long as you have the loan. The total dollar amount of the payment may increase but that would be a result of increases in taxes and insurance, both of which usually are included the mortgage payment of your dream home.
If you would like the peace of mind that comes with a stable interest rate payment, then a fixed rate mortgage may be a great choice for you. Borrowers often choose fixed rate mortgages when interest rates are low and are expected to rise.
Fixed rate mortgages are offered with repayment terms of:
30,25,20 and 15 year Fixed Rate Loans
30 year fixed rate mortgage: Monthly interest and payments are fixed and amortized over 30 years. This type of mortgage is often selected by borrowers who want the security of a fixed rate. Payments are typically higher than adjustable rate mortgages.
25 year fixed rate mortgage: Monthly principal and interest payments are fixed and amortized over 25 years.
20 year fixed rate mortgage: Monthly principal and interest payments are fixed and are also amortized over 20 years. Payments on a 20 year fixed rate mortgage generally are higher than a 30 year or 25 year fixed rate mortgage but lower than those of a 15 year fixed rate mortgage.
15 year fixed rate mortgage: Monthly principal and interest payments are fixed and amortized over 15 years. This type of mortgage is preferred by borrowers who want a fixed rate and the benefit of "rapid equity accumulation" through higher monthly payments. The payments on a 15 year fixed rate mortgage are the highest of any of the fixed rate programs, however the interest rate is usually the lowest of all fixed rate loans except for the 10 year fixed rate loan.
Who benefits from a fixed rate mortgage?
- Borrowers who want the security of stable fixed mortgage payments.
- Borrowers planning to stay in their homes for the long term.
- Borrowers who typically have a conservative approach towards home financing.
- Borrowers who want a simple, less complicated and unchanging mortgage payment.
Hopefully one of these loan options will help you to purchase your dream home.
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