This "traditional" type of loan maintains its original interest rate throughout the entire life of the loan. (Any change in monthly loan payments will be due to increases in other charges like insurance or taxes that will naturally occur over time.) Fluctuations in market rates, over the term of your loan, won't have any impact on the amount of interest you pay because that rate is already "fixed." A Fixed Rate Mortgage loan may be a good choice if you:
- Want the security of knowing your interest rate will not change, nor will your monthly payment, unless property tax and insurance amounts change
- Plan to stay in this home for several years
- You don't expect your income to increase significantly in the coming years
Fixed rate Mortgage Loans come in various terms such as 15 or 30 years. In determining the length of your loan, you may want to consider:
- Total amount of interest you want to pay over the course of your loan
- For example, the total cost of a 30-year loan in terms of the interest paid on the loan is higher than the total cost of a 15 year loan. With a 30-year loan, you have the advantage of lower monthly payments due to the longer loan term.
- With a 15-year loan, you have the advantage of repaying the loan more quickly with higher monthly loan payments.
- Your ability to make high monthly payment
- If you can afford to pay more per month, you reduce the number of months you have to pay. Also, choosing a 15-year term will save you thousands in interest charges vs. the typical 30 year term
Another option to decrease the amount of interest you pay is to get a 30-year loan, so you don't lock yourself into higher monthly payments, but pay a little "extra" each month towards the principal when you are able to do so.
Additional Disclosures
30 Year Fixed
| Best Choice If:You plan on staying in the home long-term.
You expect interest rates to increase
You want security in knowing your payments will not change
| Advantages:Fixed principal and interest payments for the full term of the loan.
No risk that changing market conditions will increase your monthly payments.
| Disadvantages:More interest paid over the life of the loan as compared to the 15 year fixed
If you plan on paying off your home or in the home less than 10 years, an ARM program may be more beneficial.
| Sample Payment:Purchase Price: $125,000
Loan Amount: $100,000 |
First Time Home Buyer 30 Yr Fixed
| Best Choice If:You plan on staying in the home long-term.
You expect interest rates to increase
You want security in knowing your payments will not change
| Advantages:Fixed principal and interest payments for the full term of the loan.
No risk that changing market conditions will increase your monthly payments.
| Disadvantages:More interest paid over the life of the loan as compared to the 15 year fixed
If you plan on paying off your home or in the home less than 10 years, an ARM program may be more beneficial.
| Sample Payment:Purchase Price: $125,000
Loan Amount: $100,000 |
15 Year Fixed
| Best Choice If:You plan on staying in the home long-term.
You need your monthly payments to remain fixed over the life of the loan.
You would like to pay-off the loan balance quickly.
| Advantages:Fixed principal and interest payments for the full term of the loan.
No risk that changing market conditions will increase your monthly payments.
Save money in interest as compared to the 30 year fixed.
| Disadvantages:Monthly payments are higher than a 30-year mortgage
| Sample Payment:Purchase Price: $125,000
Loan Amount: $100,000
|
Non-Owner Occupied 15 Yr. Fixed
| Best Choice If:The title will be in your individual name (not in your business name)
You plan on staying in the home long-term.
You need your monthly payments to remain fixed over the life of the loan.
You would like to pay-off the loan balance quickly.
| Advantages:Fixed principal and interest payments for the full term of the loan.
No risk that changing market conditions will increase your monthly payments.
| Disadvantages:Monthly payments are higher than a 30-year mortgage
|
