This is the most popular type of mortgage as the monthly payment for interest and principal remains fixed throughout the mortgage term. Property insurance and taxes may increase, but the monthly repayment of the amount will be stable.
Fixed rate mortgages are available for 10 year, 15 year, 20 year, and 30 year periods of time. There are also fixed rate mortgages available “biweekly” which helps to shorten up the loan by making the payment every two weeks.
Fixed rate mortgages have 2 distinct features, first one is that the interest rate would remain the same through out the term of your mortgage. The second feature is that the payment of the loan remains level for the life of the loan and is structured for the repayment of the loan at the end of the mortgage term.
The most popular fixed rate loans are 30 year mortgages and 15 year mortgages. During early payment periods, a large amount is being taken for the interest and the rest goes to the balance principal amount. For instance, a 30 year fixed rate mortgage will take 22.5 yrs of the level payment of the loan for the payment of the half of the mortgage amount.
Under a 30 year fixed mortgage, you can choose to pay only interest or you can pay off principal with interest. This is a great option available for those who are going through a tough time with money. With this option of lowering the payment, you can increase the cash flow for paying off interest bills, remodeling your house, financing school or college, or increasing your retirement savings.
With a fixed rate mortgage, your loan rate is fixed for the mortgage term. You can pay interest only for 10 years and pay the balance interest plus principal for the next 20 years. This helps you to refinance the loan without any pre-payment penalty.
The advantages of a 30 year mortgage are the monthly payments are lower, interest rate remains the same even if the interest rate goes up, and monthly payments do not increase as it remains the same for the entire 30 years. With a 15 year mortgage you would be paying higher monthly payments, but for a shorter amount of time.
If you planned for a long-term loan and do not like risk, you may opt for fixed rate mortgage.
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