Fixed rate mortgages are the mortgages where the rate of interest remains the same throughout the tenure of the mortgage loan. There are many borrowers who like to go for fixed rate mortgage deal because unlike adjustable rate mortgage the rate of interest doesn’t change and the borrower will never face unexpected increase in the monthly payments. Thus it is very popular among the borrowers. There are many types of fixed rate mortgages. The two most commonly borrowed long-term mortgages with fixed interest rate are:Do you want to learn more? Visit fixed rate mortgage basics.
-30 Year Fixed Rate Mortgage (30 Yr FRM): This mortgage program’s tenure period is spread over 30 years. That means you can pay off your loan amount along with the interest till thirty years from the day you get the loan.
-15 Year Fixed Rate Mortgage (15 Yr FRM): This is also similar to the previous one, but as there is only one difference that can be easily identified with the help of the name that suggests that this long-term mortgage program is for the tenure of 15 Years.
The characteristic of being long-term mortgage with fixed rate interest is a specialty, which attracts borrowers towards it as it assures stability along with smaller installments.
Other than these two, 40 Year Fixed Rate Mortgage and 50 Year Fixed Rate Mortgage are also available these days, but they are very rarely opted for. The reason being that, borrowers do not prefer to be under the burden of a single debt for such a long period.
The mortgage loans with fixed interest rates are generally a bit expensive than the adjustable rate mortgages. The long term fixed rate mortgage loans are likely to have more interest rate than the loan with adjustable rates because of natural interest rate risk attached with adjustable interest mortgages. Many people think that, since the interest rates are higher than adjustable rate mortgages it is not good to go for fixed interest mortgage loan. But what needs to be known is that if the interest rate rises up then the interest rate of the mortgages with adjustable rate will increase whereas the interest rate fixed mortgage loans will remain the same.
With a fixed rate loan the chance of mortgage foreclosure is also very low. This is due to the structural benefit offered by such loans in the form of higher control over monthly budget. The facility of smaller monthly installments aids in fulfilling other financial needs thereby reducing the need to make use of high interest rate credit cards.
In the recent times the interest rates were moving high. This is the time when interest rate of adjustable rate mortgage passed over the 30 Year FRM, at that time most of the ARM borrowers moved to refinance their mortgages with a fixed rate mortgage so that they have a fixed interest rate to pay and they can be protected from further fluctuations in the mortgage rate. This incidence shows the value and need for fixed interest mortgages in the market.