Fixed Rate Mortgage
Even in these days of the variable rate mortgage, interest only mortgage and other unique mortgage designs, the traditional fixed rate mortgage continues to be one of the most popular and useful, and for many people the fixed rate mortgage is the most secure way to buy a home.
The advantage of the fixed rate mortgage, of course, is the fact that it provides a degree of safety that variable rate and other types of mortgages simply cannot. While adjustable rate mortgages will always be subject to the whims of he interest rate market, a fixed rate mortgage provides a set payment for the of the loan, and many homeowners crave the security that such a loan can provide.
The most well known terms for the fixed rate mortgage are the 15 and 30 year mortgage, but there are other loan terms available as well, including 40 year, 20 year and even 10 year mortgages. It may take some shopping around, however, to find these rarer mortgage terms.
The length of term is an important consideration when it comes to shopping for a fixed rate mortgage. While many homeowners assume that they cannot afford the higher monthly payments on a 15 year fixed rate mortgage, if the interest rate is low enough a 15 year mortgage can be quite affordable. Due to the mechanics of amortization and compounding of interest the payments on a 15 year mortgage will not be double those of a 30 year mortgage, so it is important for potential home buyers to run the numbers on both types of loans.
The advantage of a shorter term mortgage, of course, is that such a loan will save the buyer lots of money in interest payments over the long run. Of course the downside is that the required monthly payments will be higher, so it is important to do the calculations and make the appropriate decision.
On the other hand, a 30 year fixed rate mortgage will be able to provide lower monthly payments than a comparable 15 year loan. The downside to the longer term, of course, is that the home buyer will end up paying much more in interest payments over the length of the loan, so it is important to compare the loans carefully.
Of course no matter what fixed rate mortgage term you choose, the interest rate of the mortgage will make a huge difference in the required monthly payments, so it is important to shop around for the best deal. Shopping around at a number of banks, savings and loan associations, mortgage brokers and other mortgage providers is the best way to get the best possible mortgage at the most affordable price.