Fixed Rate Home Mortgage

Fixed Rate Home Mortgage

With a fixed rate home mortgage the interest rate is set for the period of the loan. Loan terms may vary but are frequently for periods of 15 or 30 years. It is easy to grasp, that a fixed rate home mortgage provides the opportunity of knowing exactly what your outlay will be, for the loan term. Many borrowers prefer such an arrangement, to the potentially riskier, adjustable rate home mortgage.

Longer term fixed rate home mortgages are attractive to some borrowers. When the amortization period is longer monthly repayments are lower, but you have to pay for the privilege of the longer term. Therefore, the total interest paid will be considerably greater, and the initial reduction of the capital sum borrowed will be less, than with a shorter term. This means that if you chose to sell your home within the first few years or the mortgage contract, most of the loan would remain outstanding to be paid. Of course, if the property had appreciated in value, there would still be the possibility of a useful gain.

Fifteen year fixed term home mortgages have the advantage of a shorter amortization period. As a result of this borrowers have a more substantial build up of equity in their homes, and overall interest charges are considerably lower. The major disadvantage of a shorter term is reflected in higher monthly repayments. However, there are many borrowers who are able to use such a loan to pay off their mortgage, at as early a date as is suited to their personal circumstances.

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