"Fixed Rate" Mortgages

      A fixed rate mortgage is a loan whose interest rate doesn't change throughout the term of the loan and is the most widespread of all mortgage programs.  During the past few years, the number of fixed rate mortgages has increased because of historically low mortgage interest rates.  With lower interest rates, the payments on fixed-rate mortgages are more affordable.  The only difference between fixed-rate mortgages the mortgage term length.  Fixed rate mortgages have a fixed interest rate and fixed payments during the term of the loan.

• 30 Year Fixed-Rate Mortgage

  • A 30-year fixed rate mortgage gives the best tax advantage because it has the greatest interest deduction.  The 30-year term is appealing to homeowners who are seeking the lowest monthly payment, especially if they are seeking stability and security in their payments.  In a 30 year fixed rate mortgage, the monthly payments are the same during the full term of the loan.  Each payment goes to paying both principal and interest.
     

• 20 Year Fixed-Rate Mortgage

  • A 20 year fixed rate mortgage is the same as a 30 year fixed rate mortgage except that the duration of the loan is shorter.  The shorter term results in
    a significant savings in interest over the course of the loan. 
     

• 15 Year Fixed-Rate Mortgage

  • A 15 year fixed rate mortgage is the same as the 20 year fixed rate mortgage and the 30 year fixed rate mortgage.  The 15 year fixed rate mortgage calls for higher payments, but it results in a large reduction of principal with each payment.  If you can afford the higher payments,
    you will save in the long run.

Fixed rate mortgages are best when rates are at relative lows compared to the previous 2-3 years. If there is a high interest rate cycle, a fixed rate loan might not be the best choice whereas if your in a low interest rate cycle, it might be beneficial to lock in that low rate. Fixed rate loans have fluctuated throughout the years from as low as 4% - 20%.

If your planning on residing in your home for more than 5 years, a fixed rate loan can be more attractive than an Adjustable rate mortgage (ARM). With an ARM, you might be taking a gamble with the lower rate today and having that rate along with your payment, increase in the future. With a fixed rate mortgage, the rate that you "lock" in, is the rate that stays with you throughout the term of the loan. You will always have the security of knowing your rate and monthly payment will not increase.

Paying less interest can make a 15 year fixed loan more attractive, while the higher monthly payments can make it less so. Not everybody can qualify for a 15 year fixed loan even though they qualify for a 30 year fixed rate mortgage. With a 20 year fixed rate mortgage, many lenders keep the same rate as a 30 year fixed but simply shorten the payback period.

Many Lenders offer amortization periods other than 15, 20, and 30 year fixed, although most limit the options to 5 year increments, with a 10 year minimum. Instead of 15 or 30 year loans, you may choose 10, 15, 20, 25, 30, 40 or even 50 years. Don't make the assumption that just because you only see 15 or 30 year rates that there's nothing else available to you.

Call and speak with us today and one of our Loan Professionals can guide you toward the best loan option for your needs.