Fixed Rate Mortgages

 


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A fixed rate mortgage is a conventional form of loan with a fixed rate of interest and fixed equal monthly payments for the entire term of the loan. The term of the mortgage is usually 10, 15, 20 or 30 years. The borrower can decide within how many years he wants to repay the loan. The longer the gestation, the lower the monthly payment.

This kind of long gestation loan is generally taken for home loans. The federal government provides various incentives, such as tax reductions for mortgage interest to promote owning a home.

The major advantage of a fixed rate loan is that the rate of interest remains unchanged for the entire term irrespective of inflation and consequent interest rate fluctuations. The borrower will never have to worry that the interest rate would increase. If the interest rates drop, one can avail the re-financing facility – take a new loan, using the same property as security at a lower rate of interest and pay off the older loan with the higher rate of interest.

There are some disadvantages, too. Since the interest rate risk is borne exclusively by the lender, the rate of interest is on the higher side compared to adjustable interest mortgage rates. Also, as the rate of interest is fixed, you’ll have to pay the same amount despite a drop in interest rates. Re-financing is the only way out, which can turn out to be a cumbersome process.

Mortgage rates depend on the economy. So one should be patient and wait for the right time to secure a mortgage at a sensible rate of interest. One should do thorough research before settling on a fixed rate mortgage deal because different banks offer different rates. More often than not the loan depends on the credit history of the borrower and the risks specific to the mortgage.

Studies show that 80% of Americans prefer a fixed rate mortgage when borrowing for a house. But remember, that mortgage is a very serious legal commitment and any failure on your part to make the payments within the permitted time will give the lender a legal right to take over your dream house.

Fixed Rate Mortgages provides detailed information on Fixed Rate Mortgages, Fixed Rate Mortgage Interests, Long Term Fixed Rate Mortgages, 30 Year Fixed Rate Mortgages and more. Fixed Rate Mortgages is affiliated with Adjustable Rate Mortgage Loans .

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