To choose the right mortgage loan, it’s important to understand the “fixed rate mortgage” definition. This type of loan has several advantages, including predictable monthly payments and long repayment terms. However, a fixed rate mortgage might not be right for everyone.
Here is a quick guide to understanding this type of mortgage:
When comparing mortgages, you’ll encounter fixed rate mortgages and adjustable rate mortgages. As the name suggests, the interest rate of an ARM adjusts with market fluctuations, but the loans are offered at low introductory rates for a limited time period.
ARMs usually have introductory rates lasting anywhere from one to five years. Once the introductory period ends, your interest rate will increase with a cap of to 2% per year, or 5% over the lifetime of the loan.
Compared to fixed rate mortgages, ARMs are more complex loan programs and typically better for borrowers who have less intention of staying in the same home for an extended period of time.
Fixed-rate loans are incredibly affordable because of the predictable nature of their repayments. While the homeowners coverage and taxes may vary, your mortgage payment will remain the same. This affects your budget for the rest of your month, and plays a major part in your financial planning.
Besides reducing the risk of default on fixed-rate loans, your loan rate remains constant. Whatever your rate is, the amount you paid will remain unchanged when you took the loan. Often, these rates are higher than they would be for an ARM.
Fixed-rate mortgages can be repaid during a predetermined amount of time. They are usually offered as 30-year home loans, giving you a maximum of 30 years to pay the full amount.
This may seem like a long time, but the extended timeline is one thing that ensures a lower monthly mortgage payment.
There are other options available, such as a 15-year mortgage. These can work well if the borrower has sufficient cash to pay the loan more quickly while still taking advantage of the fixed interest rate.
Maria Mercedes Gomez & Larissa Porta we were born in Nicaragua, but had the opportunity to come to the U.S. over 30 years ago. As immigrants in this country, we knew that we had to work very hard to receive and accomplish our goals in life. For everything, we are very thankful every day! Our experience does teach us and remind us that we have a responsibility to pay forward to our customer.
We believe that today's real estate market demands a team approach where our individual skills come together to offer our customers the benefit of twice the knowledge and experience, not to mention commitment to work diligently to assist you in meeting your real estate goals.
