With traditional fixed-rate mortgages, the interest rate will not change throughout the life of the home loan. Each month you pay back some of the money borrowed (the principal) plus interest on the money at the same, fixed-rate. Monthly payments for a fixed-rate home loan are based on set loan terms.
Generally, the shorter the term of a loan, the lower the interest rate it carries, enabling borrowers to accelerate the repayment of the principal.
It is important to choose home loan terms that fit your budget and your financial objectives. Here is a closer look at the pros and cons of a fixed-rate mortgage.
Advantages of a Fixed-Rate Mortgage
Principal and interest payments are steady and predictable, regardless of how interest rates change in the marketplace.
As the total principal and interest portion of your payment does not change, budgeting and financial planning are made easier.
Disadvantages of a Fixed-Rate Mortgage
Initial principal and interest payments are higher than those of adjustable-rate mortgages.
To benefit from an interest rate decrease, you would have to refinance and incur the costs of that refinance. This could be problematic if property values are falling.
Borrowers Likely to Choose a Fixed-Rate Mortgage
Anyone more comfortable with the safety and security of steady and predictable principal and interest payments that remain the same if interest rates rise. (Note that if the monthly payment for any mortgage loan includes escrow amounts for taxes and insurance, your payment could change over time due to changes in property taxes, insurance, community association or condo fees.)
Anyone planning to keep his or her home (and mortgage) for longer terms.
Anyone who believes that future interest rates are likely to be higher than the current rate.
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Find out how 1st Mariner Mortgage can help you with your residential Fixed-Rate Mortgage. If you are interested in a VA loan, contact our VA loan specialists to learn more today. Our representatives are ready to assist you.