Fixed Rate Mortgages

Tip 1. Fixed Rate Mortgages Are Available in Several Term Lengths

• When we think of fixed rate mortgages, a 30 year fixed mortgage rate usually come to mind. What you may not know is that fixed rate mortgages are also available for 15, 20, and even 40 year terms.
• Home buyers opting for a 15 year fixed loan rate generally make larger payments on lower interest loans. These loans allow owners to build equity more quickly.
• Longer term fixed rate home loans do not build equity as quickly but the payments are smaller, which allows the buyer to purchase more home for their money.

• Unlike adjustable rate mortgages, fixed mortgage rates and monthly payments remain largely the same for the life of the loan. Small payment changes may occur due to increased escrow expenses. This should not be too much of a concern as it is better to have enough, or even too much money in your escrow account. Your lender will refund any overpaid escrow funds after taxes and insurance have been paid.
• Fixed rate home loans are particularly attractive for the protection they offer against rising interest rates. Home owners are not impacted by market forces such as inflation because their interest rate is locked in.

• Fixed rate loans are a mixed bag. While they do offer protection against payment shock when interest rates rise, they don’t offer any payment relief when interest rates fall.
• Homeowners with fixed mortgage interest rate loans cannot take advantage of any reduced interest rates without refinancing their loan.
• Be aware that there are fees associated with refinancing. Consider using a loan calculator to determine if refinancing your fixed rate mortgage for a lower rate really will save you money.

• Interest only loans are gaining in popularity. If you’d like to include this option in your fixed rate home loan, here is what you should know:
• Home owners choosing a fixed rate mortgage with an interest only component will benefit from smaller payments (interest only) during the initial loan period. This can be a good option if you anticipate a significant change in your income to adequately cover payments during the second loan period.
• In the second loan period, home owners will make payments on the interest as well as the principal. Home owners should anticipate significantly higher monthly payments during this period. For this reason, interest only mortgages require very careful consideration.

Final Fixed Rate Home Loan Tips:

• Home buyers planning to sell within 5 years may want to weigh the benefits of an adjustable rate mortgage against a fixed mortgage rate.
• If you have a longer term loan and want to build equity a little faster, you can make extra payments to your loan principal.