This is the most common type of mortgage because your interest rate does not change over the life of the loan. This provides stability and security for the borrower.
A fixed rate mortgage ‘locks’ you into an interest rate for the entire life of the mortgage. The 30-year and 15-year are the most common fixed rate mortgages are the most common but other terms are available. Generally, a fixed rate mortgage is a good choice when interest rates are low, as the rates rise an adjustable rate mortgage may be a better choice.
When deciding between a 15,20,30, and even 40 Year Fixed Mortgage, it is important to consider what your savings and cash flow requirements are. Many borrowers can benefit by opting for a longer term mortgage with a lower monthly payment, while putting the savings into an investment account.
Fixed Rate Mortgages are now available which combine the security of a Fixed Rate for up to 30 years with flexible payment options which were until recently only available on more risky Option ARM programs.
If you are considering refinancing your adjustable rate mortgage to convert to a fixed rate mortgage, please review some of the most popular fixed rate loan options, and evaluate their pros and cons.
With he average home owner refinancing every 5 years the fixed rate mortgage loan is not always the best choice for home owners. If you will be relocating or know that you will need to refinance in the coming years then an ARM may be a better option for you. The ARM will have a lower rate then the fixed rate and are available in 2,3,5,7 and 10 year fixed periods.
Most lenders offer fixed rate mortgages on terms of 10, 15, 20, 25, and 30 years. Generally as your term goes down, so will your interest rate. For example if you were to look at the difference between a 30 year mortgage and a 20 year mortgage you would probably be looking at a difference of .125% to .25% between the two rates, with the 20 year loan offering the lower rate.
While fixed rate mortgages are generally the ideal choice for most borrowers, it may not be the best choice for you. Let your mortgage consultant know about your short and long term plans and discuss what other alternatives may be more financially beneficial to you.