15 and 30 Year Fixed Rate Mortgages


Fixed rate mortgages are the first choice of many risk-averse borrowers. And during periods of historically low interest rates they might be the most sensible mortgage loans available. For borrowers who want a lower payment but are uncomfortable with adjustable rate mortgage (ARM) options, lenders have come up with fixed rate mortgages with 40 or even 50 year terms. Although longer terms mean more interest paid over the life of the loan, the lower payments may help borrowers comfortably afford a home without taking a chance on an ARM or interest-only product.

Advantages: Fixed rate mortgage payments are easier to budget for because the payment and rate never change. They are fully-amortized, so homeowners gain equity even if their home's value doesn't increase rapidly.

Disadvantages: Interest rates are typically higher than an ARM's introductory rate; when interest rates drop, borrowers must refinance their mortgage to improve their rate--it won't automatically decrease like it can with an ARM. The possibility of rates moving lower while the homeowner is stuck in a 30 year FRM is called interest rate risk by economists.

The fixed rate mortgage is a great loan for those who anticipate keeping their houses for the foreseeable future, prefer to avoid risk, and don't expect any major increase in income. If they can afford to, borrowers can make additional principal payments to accrue equity faster, retire the loan sooner, and pay less interest.

Types of Fixed Rate Mortgages:

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