Fixed rate or conventional mortgages remove much of the guesswork from home loans. They are the original and simplest type of home mortgage, and they are the most popular, because of the payment stability. The home buyer knows up front exactly what his monthly payment will be, how quickly equity will accrue, and how long it will take to retire the loan.
The monthly payment for a fixed rate mortgage is based on the current interest rate and the loan term with a declining portion applied to interest. At the outset, most of the mortgage payment goes toward paying interest due. Toward the end of the loan, most of the payments are applied to the principal.
Most mortgage rates are now at historic lows, but fixed-rate loans are the most stable, least costly, and recommended type of loan for most home buyers. The available terms of the most loan programs is set in 5-year increments; 10, 15, 20, 25 or 30 year. A 15-year term allows a homeowner to build equity faster, with a lower interest rate and less interest charges over the term of the loan, in exchange for a higher monthly payment that the longer terms. A 30-year mortgage compares to the shorter term, with lower monthly payments with a larger portion applied to interest. Interest is tax deductible, which should be confirmed for your tax professional. The 30-year term will build equity in your home at a slower pace than the shorter terms.
The most common alternative is adjustable rate mortgage. In this type of mortgage, the initial interest rate is usually a little lower than a fixed rate mortgage, but the interest rate may go up or down, and the monthly payments will change along with it. Qualifying for an adjustment may be based on the maximum future payment following an adjustment, which may be approximately the same as a fixed rate.
The largest benefit of a fixed rate loan is that it eliminates uncertainty. They are stable and consistent, offering peace of mind, which for many people is worth its weight in gold. Additionally, it makes refinancing easier, because you already know your monthly payments.
Mortgage Investors Group supports customers in attaining their dream homes. Our reputation for delivering unparalleled service aligns borrowers with the best solution for their financing needs. We offer a diversified line of residential mortgage products, including government and conventional loans, for purchase and refinancing. We are based in Tennessee and have nearly 400 employees in 25 offices in seven states who are ready to support your home purchase.
