Fixed-rate mortgage
- A mortgage with payments that remain the same throughout the life
of the loan because the interest rate and other terms are fixed and
do not change.
There is a misconception by the general public. They seem to think
that fixed rate is always the best way to go. This is not true because
everyone's situation is different. If you were only going to be
in a home for 3-5 years then it would cost you more money for the
fixed vs. an Adjustable Rate Mortgage (ARM).
Although Fixed Rate Mortgages (FRM) may not be financially right
for some homeowners, FRM's nonetheless offer the ease of mind of
fixed payments for the life of the loan. For those who plan to move
or refinance within a few years, an Adjustable Rate Mortgage or
a Hybrid Mortgage is usually the answer, especially in a high-interest
environment. For homeowners who are not comfortable with the uncertainty
of their future mortgage payments, the psychological and mental
benefits of knowing the exact monthly mortgage payment for the entire
loan term may outweigh the higher starting rate of a FRM.
The rates for fixed rate mortgages change based on the term you
choose. Typically 40 year mortgages have the highest rates, followed
by 30 year fixed, 25 year fixed, 20 year fixed, 15 year fixed and
10 year fixed.
If you are planning to use the equity in your home to pay for future
like remodeling, college tuition, etc., you way want to think twice
about locking in a fixed rate for the next 30 years. There is no
reason to pay more than you have to today to guarantee a fixed rate
15 years from now that you won’t be able to benefit from.
