Understanding Fixed Rate Mortgages

Understanding Fixed Rate Mortgages When Buying A Home

When you buy a property, the kind of interest rate that you select will be an important factor to consider when deciding on a mortgage type, and will ultimately affect the amount you will pay each month for your mortgage payment. One popular type of mortgage rate is a fixed mortgage, meaning its interest rate remains the same throughout the life of the loan. If you are looking to buy a home in Palm Beach, Tri-County, or Broward County, Florida, CTC Mortgage, and trying to decide what mortgage rate to use, CTC Mortgage is here to help. Continue reading to learn more about purchasing a home with a fixed rate mortgage.

Essential Information: Fixed Rate Mortgages

Adjustable rate and fixed rate mortgages are the two principal types of mortgage rates. An adjustable rate mortgage, (or ARM), rate fluctuates, while a fixed mortgage rate stays constant through the duration of the loan. Many borrowers choose a fixed rate mortgage because it makes the mortgage payments predictable each month. Although they tend to have higher rates than an adjustable rate mortgage, ARM rates typically tend to rise after their introductory temporary fixed rate period. Fixed rate mortgages also have many different term options available, ranging anywhere from five to thirty years. Essentially, the longer the loan term, the lower a borrower’s monthly mortgage payment will be.

The Advantages And Drawbacks To A Fixed Rate Mortgage

Obtaining a fixed rate mortgage can offer a variety of benefits for a borrower. Because the monthly payments are the same every month, it makes it easy to budget for since you know what payment to expect, also making it a safer option for borrowers who might experience major life changes that could affect finances, such as separating from a partner or changing careers. Depending on your loan terms, your mortgage payments may have the potential to be lower over a longer period of time, allowing you to qualify for a higher loan amount. With every mortgage payment that you make, you are paying off a portion of the principal loan amount, increasing your home equity, and a borrower also has the option of making additional payments to help pay off the loan more quickly. It is important to note some potential drawbacks to a fixed rate mortgage, for instance, there is a lack of flexibility with this loan type. If interest rates drop, a borrower must refinance the loan to take advantage of the lower rates, which requires payment of closing costs again. Additionally, during the first couple years of a fixed rate mortgage, the payments primarily go towards the loan’s interest, making it take longer to pay off the loan.

If you are interested in a fixed rate mortgages in Palm Beach, Tri-County, or Broward County, Florida, CTC Mortgage, contact CTC Mortgage today for a consultation.