29.3.15
Fixed Rate Mortgages The 30 Year Fixed Mortgage
12:19 AM
A fixed rate mortgage is one in which the interest rate does not change over the loan duration. In a 30 year fixed mortgage, the interest rate will remain the same over the duration of the entire term of 30 years. This is not surprising when you consider that almost 75 percent of all home mortgages are actually fixed rated. There is one big advantage of a 30 year fixed mortgage. You get to know precisely what your mortgage interest and principal payments are going to be and this way, you can plan how you are going to budget for your mortgage payments.
If for example, your 30 year fixed mortgage at the time of purchase was at 6 percent interest rate, this rate will remain unchanged for the entire term of the loan, that is, for 30 years. Whether the market rate rises to 8 percent or goes down to 5 percent, you can be assured that your 6 percent rate will not change. In monetary terms, your monthly payments will be fixed for the entire loan repayment period. The fixed rate mortgage is very commonly used by first time home buyers since it offers more security for buyers and is best suited for people who have a monthly budget and want to keep their houses much longer. There are repercussions however to taking a fixed mortgage, say a 30 year fixed mortgage.
Since a long period mortgage, such as a 30 year fixed mortgage, is perceived to carry a higher risk to lenders, and understandably so considering the current situation, fixed rate mortgages usually have higher rates of interest. In addition, they have higher initial monthly payments in comparison to adjustable rate mortgages. With them also come with less flexibility. Adjustable rate mortgages offer low initial rates and thus home owners are likely to afford more expensive homes. The interest rates flexibility is based on an index rate that moves in accordance to it.
In order to get the best deals, you will likely want to employ the help of a mortgage broker. This is because financing a loan can be much harder than finding the right home. Since there are many options available, you have the choice of selecting the ideal rate, targeted monthly payments and the like. Shopping around online is also a good idea if you really want a more competitive option. Do not be surprised to find mortgage websites that offer very cheap rates and competitive options. This is because some of these folks have many lender partnerships. Since this is your financial future and ultimately your life, it is worth checking it out.