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:
Fixed-rate mortgages vs. adjustable-rate mortgages
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.
Pros & cons of a fixed-rate mortgage
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.
How long does it take to repay a fixed-rate mortgage?
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.
About the Author
Rossy Figueroa
“Real estate” means so much more to me than simply buying or selling property...I believe it’s all about the people behind those transactions. A house would never be a home without them. That is why my first question to you will always be “what are your goals and how can I help you get there?”
Helping someone to plan and achieve their goals is just as important as listening to what they are. I know first-hand from over a decade of experience just how much it can take to make it happen. With honesty, diligence, and resilience, however, no hurdle is unconquerable. I can guide you through the entire process, always making you feel comfortable, informed, and in control. Like I said before, you are always the first priority.
I chose to partner with Berkshire Hathaway HomeServices Real Time Realty because, just like me, they realize that real estate agents are much more than salespeople. Every person and every goal is just as important as the last - and Berkshire Hathaway has all the tools and resources to get the job done.
It’s been an absolute privilege to meet some of you and help you achieve your goals. I can’t wait to meet the rest. Whether you’re looking to buy, sell, or both, I am confident that I am the last agent you’ll need. A better future awaits...give me a call and let’s get started!
