Regarding Fixed Rate Mortgages
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Unlike other loans whose interest rates may adjust, a fixed rate mortgage's interest rate on the mortgage note stays the same all throughout the term of the loan. This makes fixed rate mortgages among the most popular home mortgages.
Perhaps the biggest benefit of a fixed rate mortgage is the fact that you will never feel uneasy about the mortgage rate interest and principal payments because the interest is the same all throughout, regardless of what happens to the current market rate, making budgeting a lot easier and more convenient for borrowers.
For example, if a lender offers a 15 year fixed mortgage to a buyer of a home at a fixed 6% interest rate, if the market rate happens to rise, or decrease, say, to 8%, or to 4%, the borrower will continue to pay 6%. While there is no chance for the rate to decrease, there is also no chance it can increase, which secures the budget of the borrower for the duration of the loan.
While fixed rate mortgage loans are mostly offered in a 30 year term, they can be offered in 10 and 15 year terms.
There are advantages and disadvantages for each. The biggest advantage for shorter terms, such as 15 years, is that the interest rate is generally smaller. Those who are aggressive in trying to pay off the loan are given the chance to do so at a lower interest rate than that of the 30 year term. The disadvantage for a 15 year term, is that the amount the borrower will pay every month will be greater. However, because the interest rate is smaller, more of the monthly payment will go to the principal.
The advantage of the 30 year term is the exact opposite. The amount the borrower will have to pay will be smaller each month, making it easier for those who want to take a more slow and easy approach in paying for the loan. However, to compensate, lenders will usually give a higher 30 year fixed mortgage rates, which means more money will be paid off for the interest in the long run rather than the principal.
Choosing the best fixed rate mortgage depends on the borrower's preference and lifestyle. But not only that, borrowers should also consider their location, because while fixed rate mortgages might seem the way to go, there are also other mortgage options that might be more appropriate for borrowers in specific city or state. For instance, potential home buyers in San Diego, they will want to find out the popular San Diego mortgage loans available, by visiting websites with that information, before deciding which mortgage loan option to choose.
More useful information can be found at MySanDiegoMortgage.com.
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Fixed rate mortgages are really the only way to go. I cannot imagine not knowing what could happen five years down the road. We do live in such uncertain times.
Agreed with Mireille, anything other than a fixed rate mortgage seems like financial suicide. Great hub!
Quality information here! I just refinanced my mortgage and had to decide between a 30 year fixed and a 15 year fixed rate mortgage. Though I intend on paying it off well before the 30 years I decided to take that option because it offers more flexibility. For that flexibility you're paying a slightly higher interest rate, but to me it seemed worth it.
Of course, 15-year notes are better choices due to the reduced amount of interest paid. High-income earners, also, consider that the mortgage interest can be deducted. Sometimes, 30-year notes make sense for some borrowers.
mulberry1 Level 1 Commenter 22 months ago
I had a mortgage on my first home and had a 30 year fixed rate. It worked out great. Low rates allowed me to pay it off after 3 years. (nah, nah, nah, nah, boo, boo! to the mortgage company)