Nations Choice Mortgage Fixed Rate Mortgage Options
There are numerous types of different mortgage options that are available in the market today. This makes it easy for most potential and existing home owners to find a loan type that will best suit their needs. One of the most popular types of mortgage is the fixed rate mortgage. The main reason for its popularity is that most home owners appreciate having the stability of monthly payments.
Fixed Rate Mortgage
A fixed rate mortgage is fixed at the agreed interest rate at closing, throughout the life of the mortgage. This means that you will be able to set your family budget as you know how much you will need to allocate for the monthly payments every month. For people who know how much their disposable income is every month, it provides a stress-free stability for home owners.
Fixed rate mortgages are normally set at a slightly higher interest rate than the adjustable rate mortgages. With a fixed rate mortgage means that even when the interest rate falls, you will still be paying the fixed monthly payments unless you decide to refinance. Most home owners who have fixed rate loans are happy with it as the inverse is also true, if the interest rate rises, the monthly payment remains at the fixed rate.
People on a fixed income or a tight budget can benefit greatly from a fixed rate mortgage due to its fixed monthly payments. Knowing the amount that you have to set aside for the monthly mortgage payments allows you to manage your budget more efficiently without having to lose sleep about unexpected rise in mortgage payments.
Similar to adjustable rate mortgages, the early years of the fixed rate mortgage is focused on paying the interest of the loan. During the latter years of the mortgage term, the home owner starts to make a dent on the principal of the loan. But, throughout the mortgage term, there is relative peace of mind as the monthly payments remain fixed.
A conventional fixed-rate mortgage has the following characteristics:
- The interest rate remains the same during the life span of the loan.
- The borrower makes one payment per month or 12 payments each year.
- The monthly payments are constant during the life span of the loan.
- A portion of the monthly payment covers the loanâ€™sprincipal, and a portion covers interest.
In general, the most common fixed rate mortgages are for 15-years or 30-years though a loan for any duration can be negotiated. A loan of a shorter term has advantages over a loan that is of a longer term. This is because the loan is paid off much quicker and the cost of interest is smaller with the interest rates being lower. Some people consider the higher monthly loan payment of a short-term loan as a disadvantage.
Fixed Rate Mortgage Variations
The fixed rate mortgage is not limited to the traditional kind. There are other versions of the fixed rate mortgage that you may want to take into consideration.
- Bi-Weekly Fixed Rate Loans â€“ A mortgage that is bi-weekly requires two payments every month â€“ one every two weeks â€“ instead of the usual once a month. The bi-weekly mortgage payments can be structures in a way so that each payment is half the monthly payment of the conventional fixed rate mortgage payment. When this is done, the home owner pays the equivalent of 13 monthly payments per year but the interest expense is lowered and the loan is paid off in less time. The 13th payment of the â€œextraâ€ payment makes it possible to pay off a mortgage that is for a 30 year term within 18 to 20 years. Traditional fixed rate mortgage holders can also take advantage of making the 13th payment or â€œextraâ€ payment each year which is called a prepayment.
- Balloon Loans â€“ A balloon loan is actually a type of short term loan that works like a conventional fixed rate loan. It requires monthly payments of interest and principal. After a certain period of time which is usually anywhere from 3 to 10 years, the loan becomes 100% due which means the borrower needs to pay the loan in cash. This is referred to as a balloon payment although the borrower can opt for a refinance. Generally, the interest rate of a balloon loan is lower than that of a conventional fixed rate mortgage.
- Interest Only Mortgages â€“ These are loans that allow the borrower to pay only the interest for a specified period of time at the end of which the borrower may either repay the principal or renew the interest only mortgage (depending on the lender) or change the loan to a conventional fixed rate mortgage if there is some arrangement that has been made.
When a fixed rate mortgage is being applied for, you may discover a term â€œdiscount points.â€ The term discount points refer to the fees that are paid upfront in order to get a lower interest rate on the loan. One discount point means one percent of the amount of the loan. This one percent usually â€œbuysâ€ the interest rate to go down by 0.25 percent. As an example, if you are hoping to get a loan of $100,000 at a 7 percent rate of interest, you can â€œbuyâ€ 2 discount points at $3,000 to get a lower interest rate of 6.5 percent on the loan.
The amount of the down payment also helps to determine whether you need to pay a PMI or private mortgage insurance. The usual situation is that is you get a mortgage but give only 20 percent as your down payment you will be required to pay private mortgage insurance. The insurance is to protect the lender just in case you default on your mortgage. After you have managed to pay 20 percent of the principal of the mortgage, you can then inform the lender and ask them to stop paying the private mortgage insurance or PMI.
A fixed rate mortgage is a very good option for purchasing a home if the home owners plan to live in the home for a long period of time. This is because there is a sense of security due to the knowledge that you have fixed monthly payment amounts that can be factored into the monthly budget and you are assured that the interest rate on your loan will not change. If there are indications that interest rates will rise, then a fixed rate mortgage can definitely be the better option instead of an adjustable rate mortgage.
If you are looking for a fixed rate mortgage to purchase a home or are looking to refinance your existing adjustable rate mortgage to a fixed rate mortgage, Nations Choice Mortgage can help you make that happen. Nations Choice has a well-trained team of mortgage specialists that are always available to help you with any queries or requests for information. You can contact us and expect our immediate response.
You can feel free to use our quick quotes option and get an idea of what your amortizations may be for the loan you are aiming for. Our team is always on standby to help you make the best decision regarding your mortgage-related needs. We understand that choosing the right type of mortgage for your needs is a big decision and we are always here to help you make an informed choice. All you need to do is complete our very secure online quick quote and you will receive a personalized instant quote prepared by our licensed loan processor. You can then choose the type of loan which you feel fits your needs best. If you are unsure, feel free to contact us and we will provide you with all the information you need.
At Nations Choice Mortgage, we handle the loan process from start to finish until your dream to have your own home comes true.
The first steps to turning your dream to own your first home a reatlity are:
- Complete our simple, secure online quick quote on the sidebar of this page
- Receive a personalized instant quote from a licensed loan originator
- Choose the loan that best fits your needs
- Let us handle the loan process from start to finish until the day you get your keys
When you are truly ready to make your dream to sleep in your own home a reality, Nations Choice Mortgage can help you make sure you enjoy all the benefits of getting a home loan that truly fits your needs.
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Give us a call today at (888) 508-9955
. You'll be happy you chose NationsChoice Mortgage.