Fixed Rate Mortgage Loans Understanding The Basics

Fixed Rate Mortgage Loans Understanding The Basics



Fixed Rate Mortgage Loans - Understanding the​ Basics
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.




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