Fixed mortgages are the mortgage loan that has an interest rate that remains fixed through out the loan period. There won't be any changes in the interest rate once you lock it in a fixed mortgage.
The fixed mortgages have a lot of advantages than any other home loan. It will offer you a peace of mind as the interest rates in the market are quite uncertain. No body can control the interest rates in the market.
It often fluctuates and changes from one minute to another. If this happens then, nobody can know how much they have to make the payment every month. Making a budget will be quite impossible but with the fixed rate mortgage you can plan out the exact budget to spend every month.
Benefits of fixed mortgages
Since the fixed mortgage has a fixed interest rate, the monthly payment will also be the same. You can know how much you will have to pay to the lender every month.
This mortgage will also provide you total security against the rise of the interest rates that mostly occurs from time to time. For people with a fixed or tight income this mortgage will serve the best.
Another benefit that the fixed mortgages will offer is inflation though indirectly. Inflation has a big impact on the increase of monetary values of services and goods over long times. Though your income may increase but things will cost a lot more. When this happens your fixed mortgage will remain the same. Well that's a great bonus.
The fixed rate mortgage is protected by law and no one can do to increase or decrease that rate. With this loan, home owners can plan a long financial budget. They can save a lot of money all along the way.
Types of fixed mortgage
There are many types of fixed rate mortgages most of them have a long loan period. The two most common and popular types of fixed rate mortgage are the 15 and 30 year fixed rate mortgage.
15 year fixed rate mortgage
As the name suggest the 15 fixed rate mortgage is the home loan where the interest rates does not change for 15 years and you have to pay off the loan amount during that period. This mortgage offers a lower rate than the 30 year fixed rate mortgage. The loan period is also low and you have finish paying it faster. You have a high monthly payment though.
30 year fixed rate mortgage
This is a mortgage where the loan period is for 30 years and the interest rate remains stable through out that long term. The great thing about this loan is that it has a lower monthly payment than the 15 year fixed mortgage. However this loan will come with high interest rates due to the risk involved for the lenders.
Some important things that you have to remember are that this loan is suitable for those homeowners who have the intention to stay in the house for a longer time. Before you take the loan try to compare the different companies to get the best deal.
About the Author:
Charles Bretz is a Financial Advisor and Author on Money Matters.
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Date Published :
Nov 26 2008