MORTGAGE RATES » Home Mortgage Loan News

When shopping around for a mortgage loan, you will undoubtedly come across two frequently used terms: Fixed rate and ARM.

Fixed rate and adjustable rate mortgages are the two most common types of home loans, but do you know the difference between the two? If not, you may not be sure which one is best. Compare the following pros and cons of each to determine whether a fixed-rate mortgage or adjustable rate mortgage is better for you.

If you are looking to pay off your loan as fast as possible, but with the security of a fixed interest rate, a 10-year fixed rate mortgage might be the best mortgage option for you. These loans have a shorter term than the traditional 15- or 30-year mortgage and tend to have the lowest mortgage rates of all the fixed rate home loan products. Also, since the duration of the mortgage is shorter, you are likely to save thousands of dollars in interest over the life of the loan.

10-Year Fixed Rate Mortgages Versus Long-Term Mortgages

For home buyers new to the world of mortgages, traditional 15- and 30-year fixed rate mortgages are usually talked about most. However, those who are considering buying a home in higher-priced areas should know about the option of even longer-term mortgages: 40-50 year mortgages. These fixed rate mortgages may cut monthly payments by quite a bit, but are they the right choice for you? What are the pros and cons of taking on such a lengthy loan?

To help you decide whether this is an option you want to consider, let’s take a closer look at this type of long-term mortgage.

As a homeowner of a fixed rate mortgage, you may be wondering what happens if you default on your payments. Of course, this is an occurrence that you should never let happen. However, because extenuating circumstances can and do occur, it’s good to know just what you can expect if you do fall behind.

Why People Default on Their Mortgages

When it comes to buying property, picking out your dream home is just the first in a long line of important decisions you’ll need to make. For example, how are you going to pay for it? Like most home buyers, you probably need to finance a majority of the purchase price with a home loan. So the question is, which mortgage type is the best?

There is a seemingly endless array of mortgage loan types to choose from. You individual needs, goals, financial situation and more will play into picking the one that helps you afford a new house best. However, as a starting point, most mortgage borrowers will compare fixed rate mortgage loans and adjustable rate mortgages.

What is the best fixed rate mortgage for you? The answer to that question will be determined by your own special circumstances and needs. Are you refinancing your home to a better rate? Are you a first time home-buyer? Are you taking out a second mortgage to fund a special project, such as a home improvement? You will probably find that different mortgage terms are best in each of these cases.

Most Common Fixed Rate Mortgages

In your search for the best fixed rate mortgage, you are probably going to come across 15- and 30-year fixed rate mortgages the most often. A 30-year fixed rate mortgage is a loan in which the interest is set at the same rate for the full 30-year term.

The 30-year fixed rate mortgage accounts for a very large percentage of all home loan mortgages, likely because of it’s reliability. Compared to an adjustable rate mortgage (ARM), the fixed rate mortgage is easy to understand and offers a consistent monthly payment which makes it simpler to budget into monthly expenses.

Why Choose a 30-Year Fixed Rate Mortgage?

You might secure a fixed rate mortgage because of the reliability and security of an interest rate that remains the same during the entire life of the loan. Some other types of loans, such as an adjustable rate mortgages, may include a fixed-rate for a short period of time, but usually only as an introductory or teaser rate. That’s probably why fixed rate mortgages are the most popular type of home loans in the United States. However, if you do choose a fixed rate mortgage, your decision doesn’t end here–you must decide how long you want the loan to last.

Why Choose a 15-Year Fixed Rate Mortgage?

A fixed rate mortgage (FRM) is quite possibly the most popular type of mortgage. As its name implies, it’s a home loan with an interest rate that remains fixed for the entire term. Whereas the interest rate on other types of loans, such as an adjustable rate mortgage, may adjust or “float” even if there is an introductory fixed rate period, the interest on a fixed rate mortgage remains the same no matter what for the entire loan term.

A lot of potential home buyers believe there are only a few kinds of mortgage plans, but you should be happy to know there are a variety of home loan types and ways to go about financing the purchase of a property. One kind of mortgage that may be best suited to your budgeting needs and savings goals is the deferred interest mortgage plan.

A deferred interest mortgage may also be known as a graduated payment mortgage. It allows you to make monthly mortgage payments below the actual total amount of interest due.