Fixed Rate Mortgages

Fixed Rate Mortgages

Standard Fixed Interest Rate Loans Available – Fully Amortized

These are your standard fully amortized loans. Your principle and interest payment will not change over the course of the loan, as your interest rate is guaranteed not to move for the life of the loan.

  1. 40 and 50 year fixed -Starting to be offered quite a bit more now that home prices have risen to such high levels (before the 2008 housing crash). This is usually not a good choice for the borrower as the payment difference between the 30 year fixed and the 40 or 50 year fixed is quite small, it’s usually not worth the extra 10 or 20 years of payments. Having said that, the average homeowner these days moves or refinances every 5-7 years and if the slightly lower payment makes the difference between getting the house of your dreams or losing it then this could be the loan for you.
  2. 30 and 15 year fixed -These are the two most common loan types offered to homebuyer’s when choosing a fixed rate (payment) for the life of the loan.
  3. 25, 20 and 10 year fixed These three fixed rate loans are not as well known by homebuyer’s and are not offered very often by the industry unless the homebuyer requests it or circumstances dictate it.

Interest Only 30 year Fixed Loans

  1. 10/30 – Interest Only first 10 years
  2. 15/30 – Interest only first 15 years

Interest only 30 year fixed mortgage loans have been around for awhile now and have quickly started to become favorites of consumers.

This program is like your standard fixed rate product in that your interest rate will be guaranteed for 30 years, but you have the “choice” of making interest only payments for the first 10-15 years depending on whether you choose the 10/30 or 15/30 loan (you can choose to make additional principle payments at any time).

When your interest only payment option ends it becomes fully amortized for the remainder of the loan. This means that if you choose the 10/30 and made nothing but interest payments for the first 10 years your loan would then turn into a fully amortized principle and interest loan for the next 20 years.

Now since you still owe the same amount you did 10 years ago your payment will rise substantially because you now have only 20 years to payoff the loan.

However, before you decide this loan is or isn’t for you, take a look below at the reasons you may want to choose interest only 30 year fixed loans:

  1. The vast majority of borrowers these days only keep a loan for 5-7 years; choosing to either move or refinance before then.
  2. The lower interest only payment helps many first time home buyers with the ability to use the extra money saved every month to afford the many things they will need when buying their first home.
  3. Most borrowers even if they choose to keep the loan far beyond the 10 or 15 year interest only period will have higher salaries, allowing them to make those higher principle payments easily.
  4. The principle that would have been paid off during those first years is relatively low considering the size of the loan.
  5. Every time your home increases in value you gain equity.