Fixed-rate mortgages are just what they sound like: loans that have the same interest rate throughout the life of the loan. While the interest rate is a little higher than that of an adjustable-rate mortgage, fixed-rate mortgages offer a little more stability in their consistency. Adjustable-rate mortgages start you off with a lower interest rate, but the rate will adjust periodically. That means your payments will not always be the same and you need to be prepared to pay more. With a fixed-rate mortgage, you always know how much you need to pay.
Fifteen Years vs. Thirty
Fixed-rate mortgages are usually given in fifteen-year and thirty-year terms. That means that you will have fifteen or thirty years to pay the loan. Your best option is determined by a lot of factors. Five-year loans are also available, but they do not apply to most people. They are not stable and can be more costly. This is why people tend to look more at fifteen and thirty-year loans.
- Lower monthly payments in relation to a shorter-termed mortgage.
- You pay more interest over the life of the loan.
- Interest rates tend to be higher.
The draw of a thirty-year, fixed-rate mortgage is that the payments are lower for the same loan amount. This can free up some cash each month to use for bills, emergencies, college, retirement, or another financial goal you have.
- Less interest is paid over the duration of the loan.
- Lower interest rate than a thirty-year loan.
- Monthly payments are higher for the same amount as a thirty-year loan.
Fifteen-year mortgages tend to work better for people who can afford them. If you are able to afford the payments comfortably, this loan can be paid off faster and with less interest.
- A short-term loan that is paid off quickly.
- Turns into an ARM.
- Initial interest rate lower than the 30-year mortgage.
While fifteen and thirty-year loans are the most common of the fixed-rate loans, there are also five-year loans. These aren’t as common because they tend to be used by people who plan on selling within five years. This is because they are only fixed-rate for five years. After that, the interest rate adjusts and they shift into an adjustable-rate mortgage. Depending on the climate of the industry when it shifts, this could be good or bad.
Trends in Interest Rates
Because inflation has been under control since 1985, interest rates have been declining. Since March of 2002, interest rates have been below seven percent. You should still speak to a specialist about the rates for the loan you are seeking. While the trend might speak to a certain rate, this doesn’t mean it applies across the board. These are an average or likely interest rate given certain factors. Your credit history, the current trend, and the lending institution all play a factor in what your loan will look like.
Get Down Payment Assistance with TX Home Now
There are a lot of details that go into a loan. Making sure that you understand your options is very important. If nothing else, you want someone to guide you through your choices. It’s also helpful to have someone who can help you through the application process. The sooner you speak to someone who understands the different types of mortgages, the better. Getting the details wrong and signing up for a loan can put you in a difficult financial situation. All it takes is one phone call to TX Home Now to get all the answers to your questions. Speak with a specialist today to find out if you’re eligible for a down payment assistance program!
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