Anyone who is new to mortgages or new to the process of applying for a home loan, this article will be a valuable resource to introduce you to the basic fixed rate mortgage. This is one of the easier mortgages to understand and also relatively easy to calculate. A basic understanding of the fixed rate mortgage will help you understand how other mortgage products may differ from the fixed rate, but also help you to ask intelligent questions when speaking with and evaluating a loan officer you may potentially be working with.
This fixed rate mortgage is one of the more common mortgage products. Typically when people discuss the need to get a home loan or a mortgage or even a refinance, they’re often referring to the fixed rate mortgage. Typically when you hear an advertisement for a mortgage company or other lending institution, you’ll most likely hear rates quoted for a 30 year fixed mortgage(not to be confused with a 20 year fixed mortgage). There are certain requirements when companies advertise mortgages that are based on a “truth in lending” act sponsored by the federal government. And although not followed directly in each state, when you hear ads for a specific rate, there should be an indication of what type of mortgage product that rate is associated with.
One of the main benefits of the fixed rate mortgage is that your monthly payment won’t change for the duration of the loan. In many companies, you’ll also have the advantage of being paid every two weeks. If you setup your mortgage to work on this same two-week payment schedule, you’ll end up making 26 payments per year which is the equivalent of 13 months of payments instead of 12 months. Of course, this option can be worked out at the time you’re applying for your loan as well.
There are many 30 Year Fixed Mortgage programs where payments are made either directly to the interest as in the case of interest only loan or even interest and principal with a lump sum due at the end of a given period (usually a couple of years). The fixed rate mortgage is different in this regard, at least the traditional style of mortgage here this article discusses. When you pay off your mortgage with a fixed rate mortgage, you owe nothing more to the bank or lender. There is no need to refinance your home or come up with cash to pay towards a lump sum payment or balloon payment. This style of mortgage is probably the most conservative of the various mortgage products.
Establishing your first fixed rate mortgage or even refinancing for the 10th time shouldn’t be a complicated process. The key to getting this done is to find a loan officer you can trust who will work with you and educate you as needed so that you understand what you’re paying for. Because this is such a large dollar amount that you’ll typically be paying for a home, there are ways that you can get caught paying more than you should and even small percentage changes over the life of the loan may result in you paying thousands of dollars more in interest. There are many 30 Year Fixed Mortgage calculators out there as well you can use to give you some rough estimates.