Fixed Rate Mortgages
Because of consistent payments throughout the life of the
loan, Fixed-Rate loans are easily the most popular type. Most fixed-rate loans
are from 15 to 30 years, however increments of 10, 20, and 25 are also
available. Generally, the shorter the period of the loan, the lower the
interest rate.
With a fixed-rate loan, you will typically make monthly
payments to your lender to pay any interest accrued during the period and, if
there is any monies left over, pay down the principal. In the early years of
your loan, the bulk of you payment is going to go towards your interest with
very little affecting the principal balance. Eventually though, the tables
will turn and you will begin paying more towards your principal as the balance
gets lower and you are paying less in interest.
Paying just a little extra each month can save thousands
of dollars over the life of your loan. For example, if you have a $150,000,
30-year mortgage at a 7% interest rate and you only make the minimum payments
of $997.95 each month you will pay out a total of $359,260.75. If you just
round up your payment to $1100 you will only pay out a total of $300,123.29,
saving you a total of $59,137.46, and paying off your loan in under 23 years
instead of 30!
Also available
are bi-weekly mortgage plans where, instead of making monthly payments to your
lender, you make two payments a month equal to half of what your monthly
payment would be. This allows you to pay off your mortgage quicker as well
because you are lowering your balance during the month instead of being
charged interest on the full monthly amount.
Be sure to read our other mortgage advice articles:
Adjustable Rate Loans
VA Loans
FHA Loans
Balloon Loans
Convertible Mortgage Loans
Negative Amortization Loans
Graduated Payment Mortgages
Buy-Down Mortgage
Jumbo Loans
2nd Mortgage Loans
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