What is a Fixed Rate Mortgage?

Published by julia | Filed under Buyer / Seller Tips, Market Trends, Miscellaneous, Pinellas County Homes, Real Estate

A fixed rate mortgage is one of the most common types of home loan in the USA. It’s very easy to understand and set up, and helps people know exactly what type of commitment they are making financially from the very beginning.

It has one main benefit over all other types of loan, and that is stability. No matter what happens with fluctuating interest rates, you are guaranteed the same payment each month for the entire term of your loan. This really helps give people peace of mind because they don’t have to wonder if their next loan payment will be higher than the previous one. Some people are very meticulous when it comes to bills and don’t want to feel like they are gambling on the real estate market. This is what helps make a fixed rate mortgage so appealing. The payments don’t change so you have a much better chance of being able to save up money for home repairs, vacations, and new purchases.

People who gambled on adjustable rate mortgages in the past few years discovered that their payments went up dramatically, often so much that they could no longer afford their mortgage payments. This is what lead to the foreclosure crisis, and it would have been much less likely to happen with a fixed rate mortgage.

A fixed rate mortgage is also good for people who have to travel a lot. Knowing your payment will be the same when you get back from a far away place can really help your state of mind. Even better, most lenders who will give you a fixed rate mortgage will give you the option to pay off some of the principal early without any penalties. This can be a great way to lower your overall number of payments or decrease the monthly payments. The interest you pay all depends on the real estate market when you get the loan. Once you’ve agreed to a certain interest rate, you’re locked in at that rate for the life of the loan. That way, you can decide to buy now or to wait until interest rates are lower, so you can save money.

Related reading: Tampa Mortgage and Finance