Fixed Rate Mortgage
So what's in a fixed rate mortgage. Well, not to overstate the obvious, a fixed rate mortgage is one in which the interest rate is fixed for the entire term of your mortgage. The most common term is the 30 year fixed rate mortgage. There are also terms of 25, 20, 15, and 10 years and at some institutions,including First New England, there are options for in between terms, like 28 or 8 years as well, so you can structure your term to your very specific needs.
As I said, the 30 year fixed rate mortgage is the most popular, and the Mortgage Bankers Association of America recently reported that in June 2012, 85% of all mortgages written were of the 30 year fixed variety.
A fixed rate mortgage will give you some serious peace of mind knowing that your payment will never change. If you are uncomfortable with the idea that your payment may increase at some time in the future, a fixed rate mortgage may just be the loan product for you.
You ask, what is the difference in the terms of fixed rate mortgage? Well first off, the payment on a 30 year fixed rate is lower than the payment on shorter terms. But, the interest rate is lower once you get down to a 15 year fixed rate (about a .5% improvement) and sometimes even lower for a 10 year fixed rate. In addition, shorter terms will pay off your mortgage sooner and build equity in your home at a much faster pace.
Even though the interest rate may be slightly higher with a fixed mortgage, you can take advantage of the benefits of the shorter term fixed rates with the 30 year fixed rate by making prepayments to your mortgage and pay your loan off at whatever pace you'd like with the option of the low 30 year payment if you need it.
I'd be more than happy to show you the math if you drop me an
. If you prefer give me a call 800-641-1715.