DECEMBER 12TH, 2018

Fixed Rate Mortgages (FRMs)

A Fixed-Rate Mortgage (FRM) is the most common type of mortgage loan program today according to most industry sources. Fixed-Rate Mortgages are best of course, when rates are at historic lows. A Fixed-Rate Mortgage simply means the interest rate as well as the principal payments remain the same for the entire life of the loan. Of course, property taxes and homeowners insurance may increase, but generally a consumer’s monthly payments will be quite stable. A consumer may want to look at it this way: With this type of loan, they would lock-in a low rate for the years to come as well as having the comfort of knowing their payments will not change from year to year.

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Fixed-Rate fully-amortizing loans have two specific features: 1) the interest rate stays fixed for the life of the loan; and, 2) the payments remain level for the life of the loan as well as being structured to repay the loan balance at the end of the loan term period.

Quick-Read Recap & Overview About Fixed Rate Mortgages-FRMs
Work much the way they infer by offering borrowers a set interest rate, and if the buyer applies while interest rates are low, they will continue to enjoy the lower interest. Fixed Rate Mortgages are a common choice for many consumers wishing to purchase a home. These type of mortgage products “have a fixed interest rate that is guaranteed not to change during the loan period, regardless of how the market fluctuates.” Fixed Rate Mortgages are great for those who desire fixed monthly payments and who plan to stay in their home for an extended period. Many buyers appreciate these loan products because they are predictable; this can be very beneficial for folks with fixed incomes or severe budget constraints.

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About Fixed Rate Mortgages

In addition to the term lengths outlined above, there are also “Biweekly” mortgages which shorten the loan by calling for half the monthly payment every two weeks (as there are 52 weeks per year, the consumer would make 26 payments, or in other words, 13 “months worth” every year.)

Common Questions: Advantages & Disadvantages of Fixed Rate Mortgages
The premium advantage of this type mortgage is consistent principal and interest payments. Additionally, it is a great selection if the consumer is likely to stay in their home for a long time.

The main disadvantage is a potential higher cost as these loans are usually higher priced than an adjustable-rate mortgage loan. One thing a consumer should keep in mind is that, on average, the majority of people move or refinance within a seven year period.

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