Fixed Rate Mortgage
The process of buying a house can be long and complicated, with a lot of different choices to make. One of the biggest choices to make is deciding what type of mortgage you are going to apply for in order to pay for the home. There are many different types of mortgage rates available, as well as different types of mortgages. It is important to do all of the necessary research in order to figure out which type of mortgage will be best for your specific situation. While you won’t need to make this choice until after you have found a home to purchase, it is still a good idea to start looking at your choices early on.
There are two main types of mortgages to consider: fixed rate mortgages and a variable rate mortgages. The names of the mortgages give you a sense of their differences. A variable rate loan has interest rates that can change on a monthly basis. This results in having monthly mortgage payments that may go up or down at any time, hence the use of the term variable. A fixed rate loan provides the borrower with an interest rate that will remain constant throughout the entire lifetime of the loan.
A fixed rate mortgage is the most popular choice when it comes to mortgage types. It allows the borrower to anticipate how much they will need to pay on a monthly basis and allows them to remain confident that the number will not change. Many people choose the fixed rate loan because it provides room to plan for the future, without the possibility of payment increases.
A fixed rate mortgage will often have a slightly higher interest rate than the beginning rate of variable rate mortgages. This is because fixed rate mortgages try to consider the inevitable rise of interest rates in the future and factor them into their rates. Because a fixed rate loan is harder to qualify for, many people will choose variable rates out of necessity or to get a lower initial monthly payment. However, there is more of a risk involved in choosing a floating, or variable rate mortgage.
A Fixed rate mortgage comes in many different term lengths. The most common form is the 30-year fixed rate. This means the monthly payment for the mortgage and the interest rate will remain constant for the 30 allotted years. It also means that in 30 years the loan will be completely paid off. 15-year fixed rate mortgages are also popular, but as the term shortens, the monthly payments begin to increase. If you are able to pay your loan off in 15 years, you will end up paying significantly less interest than if you were to choose a 30-year term. You should examine your financial records to determine which type of loan will best suit you.