One of the most popular options is a fixed-rate mortgage. Offering a fixed interest rate from typically one to thirty years this type of mortgage offers financial security for many families. Though fixed mortgage has many advantages, we should remember that it also has some disadvantages. Knowing the ins and outs of a fixed mortgage will help you decide whether such is right for your particular wants and needs.
A fixed mortgage is designed to give you the same interest rate that you signed up with for a set period of time. They are usually either 15 year mortgages or 30 year mortgages. You’ll pay less each month with a thirty year fixed rate mortgage, as opposed to a fifteen year fixed rate mortgage. But the more years you have the mortgage, the more years you’ll spend repaying the money with interest. With a longer mortgage term, you’ll be paying much more interest over the life of the loan.
There are some fixed mortgages that only offer a fixed rate for up to 12 months. Such offers are usually designed for high-risk customers who might not otherwise qualify for a loan. You could sign up for an introductory rate of interest that won’t be in effect very long into the loan. After the expiration date of the interest rate occurs, your rate can go up and down as the housing market fluctuates. Sad to say, that’s not always what you want to have happen. Of course the disadvantage to a fixed mortgage is that when the housing market lowers its prices, you will not benefit from a lower rate. Those with an adjustable rate mortgage will pay eitherhigher and lower rates depending upon the housing market.