A fixed rate mortgage has a fixed interest rate that comes with the entire loan term, which helps in making sure the homeowner does not face loan payments that change with movements in interest rates. In most cases, the interest rate is the same with the loan life and principal. If you are a new homeowner preferring a budget-friendly term for mortgage payment on a monthly basis, a fixed rate mortgage is very helpful.
Advantages and Disadvantages
A great advantage of fixed rate mortgage is that each monthly payment remains the same, which means that budget planning can be a lot easier, and you do not have to worry about higher payments in the future. As for its drawback, it can get difficult to qualify with a fixed rate loan, which results to you paying higher costs.
Types of Fixed Rate Mortgage
15-Year Fixed Mortgage
The more ideal and attractive option, this comes with a lower interest rate. It is easier and quicker for you to pay off the principal, allowing you to build up equity faster.
30-Year Fixed Mortgage
If you plan to stay in your residence for a long time, then this type of mortgage is the more affordable even if it comes with higher interest rates. With the 30-year spread in loan repayment, this results to lower monthly payments.