Fixed-Rate Mortgage
A fixed rate; where the interest
rate remains constant for a set period; typically for 2, 3, 4, 5 or 10
years. Longer term fixed rates (over 5 years) whilst available, tend to
be more expensive and therefore less popular than shorter term fixed
rates.
For greater flexibility, you have a choice of different amortization
periods and terms.
WHAT'S IN IT FOR YOU
(Example only - different financial institutions have different terms
and features)
* The down payment has to be at least 25% of the purchase price.
* The rate does not vary during the chosen term.
* You can choose from the following terms:
* Open term: 6 months, 1 year
* Closed term: 3 months, 6 months, 1 year, 2 years, 3 years, 4 years, 5
years, 7 years, 10 years.
The fixed-rate mortgage
is popular because:
1)
Consumers don't like the thought of their house payment
rising and falling with interest rates, and 2) whenever
rates are low, fixed rate mortgages are very affordable.
Fixed-rate loan borrowers
face one major choice: 15 year or 30? For some, a 30-year
loan makes more sense (lower monthly payments) . For others,
a 15-year loan does (less money paid towards interest).
Utilize the comparison guide below to find the best
fixed-rate mortgage. The pros and cons of each are as
follows.
From:
http://www.mortgagesort.com/
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30 Year Fixed |
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Pros |
Cons |
Offers borrowers the chance
to borrow money on a long-term basis without having to
worry about the interest rates or payments changing.
Monthly payments are lower than those on 15-year loans
because the interest is amortized over a longer period.
Lower monthly payments
free up money that borrowers can pour into investments
that yield more than their homes.
Higher interest bill
increases the amount consumers can deduct at tax time,
potentially reducing or eliminating their federal income
tax liability. |
Borrowers build equity at a
very slow pace because payments during the first several
years go largely toward interest rather than principal.
The overall interest
bill is much higher because of the long amortization
term.
The interest rates are
higher than on 15-year loans.
|
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15 Year Fixed |
Offers borrowers the chance
to borrow money on a long-term basis without having to
worry about the interest rates or payments changing.
Borrowers build equity much more quickly due to shorter
amortization schedules.
Overall interest bills are dramatically lower than those
on longer-term loans.
The
interest rates are lower than 30-year loans.
|
Monthly payments can be
significantly higher than those on 30-year loans.
Restricts home buyers to
smaller house than they might be able to afford with
longer-term loans.
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