Advantages of a Fixed Rate Mortgage

When buying a home, you are usually given the choice between two types of financing options: The adjustable rate mortgage and fixed rate mortgage. Though these are both very common types of mortgage loans, the fixed rate mortgage reigns supreme as the most popular choice among borrowers. Here’s why:

What is a Fixed Rate Mortgage?

A fixed rate mortgage maintains a consistent interest rate throughout the entire term of the loan. In other words, your monthly principal, as well as your interest payments, remain the same from the first payment to the last. There are a number of types of mortgages that fall into this category, including:

• 30-year fixed rate mortgage
• 15-year fixed rate mortgage
• Biweekly fixed rate mortgage
• Convertible fixed rate mortgage

While the 30-year fixed rate mortgage is the most common and traditional of the four, the others are gaining popularity as borrowers are looking for ways to cut down the length of their loan, as well as interest payments.

The Advantages of the Fixed Rate Mortgage

There are a number of advantages to taking on a fixed rate mortgage when purchasing a home. Here are a few:

• Stable interest rates. Unlike the adjustable rate mortgage, which has rates that can fluctuate as the market dictates, fixed rate mortgage rates remain the same for the whole term. Many borrowers like knowing that their rates will remain the same no matter what.
• Easier Budgeting. Since rates don’t change, planning a budget around mortgage payments is simple.
• Lock in Low Rates. If you secure a fixed rate mortgage while interest rates are low, you can take advantage lower monthly payments.

Obtaining a fixed rate mortgage is a great way to predetermine how much you will pay for the life of your loan. If you like the idea of stable and predictable mortgage payments, this type of home financing is a great way to go.