The benefits of a fixed rate mortgage

For many potential homebuyers today, having a fixed rate mortgage is the way to go. They want to be able to feel secure in their homes and live there for a long time to raise a family and watch their children grow up. For several decades, fixed rate mortgages have been a staple in the home loan industry.

The stability that it offers to homeowners has never lost its appeal and is now becoming even more popular today, due to the fluctuation of the housing market. Fixed rate mortgages benefits homeowners because they know exactly how much they will be paying each month in principal and interest. This contrasts to the adjustable rate mortgages that do not have a fixed rate, leaving the homeowner vulnerable and dependent upon their interest rate, which changes periodically.

The results have been devastating to many families across the country forcing them to foreclose on their homes because they are unable to make their mortgage payments. Fixed rate mortgages allow for repayment of debt in equal monthly mortgage payments over a specified period of time. Most fixed rate mortgages range from 10 to 50 years. If the homeowner has difficulty paying a certain amount for their home monthly, then they can take advantage of this and choose for themselves how many years they want to pay on their loan to make it affordable for them. Although for many, a 30 year amortization period is most common.

The fixed rate mortgage is practical because it will not affect the borrower, if the rates increase. If the interest rates happen to decrease, it still will not affect the borrower. If this happens to be the case, then the homeowner can decide at that time whether or not they will refinance their mortgage to get a better interest rate. Having a fixed rate mortgage has another benefit, in that the borrower can choose to make a larger monthly payment and direct the additional portion of the payment to be paid toward the principal. This gives the homeowner the advantage because it allows them to decrease their balance and pay their loan off faster. Many financial experts will recommend paying half of your mortgage every two weeks instead of monthly. If this technique is followed, then you will pay off your mortgage in about 22 years, saving you a lot of interest and putting more money in your pocket.

Another strategy would be to make one extra mortgage payment per year. By doing this, you will reduce the amortization period to around 26 years. Fixed rate mortgages are also favored by many government programs, such as FHA and VA loans. The fixed rate mortgage is a stress-free loan. The terms of the agreement are simple enough for a borrower to understand because the rate never changes during the duration of the loan. Having the option of being able to pay less interest, through a 10 or 15 year loan, for example, makes it very appealing and even attainable by many who want to purchase a home.