15-Year Fixed Rate Mortgages (FRMs)

Although Fixed-Rate Mortgages are available for 40, 30, 25, 20, 15 and 10 years, this documentation will focus on details for a 15-Year Fixed-Rate Mortgage (FRM). Consumers should understand that generally, the shorter the term of a loan, the lower the interest rate they could get. The good news is that a 15-Year Fixed-Rate Mortgage boasts all the benefits of a traditional Fixed-Rate Mortgage. A 15-Year Fixed-Rate is an ideal option if the consumer is able to make the higher payments as well as having the benefit of the loan paid for in a shorter amount of time. Great option too if the consumer is planning to retire. 15-Year Fixed-Rate Mortgages offer consistent monthly payments for all 15 years. And, by building equity even more rapidly than with a 30-Year or a 20-Year loan, and paying less interest, the consumer will save money in the long run. Consumers should strive to get a fixed rate loan locked-in while interest rates are low so they will benefit with a great rate for the entire life of the loan. In basic terms, “15-Year” refers to the term of the mortgage and therefore, the payments would be spread out over fifteen years.

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About 15-Year Fixed Rate Mortgages

Consumers may have some questions not covered so far and some of those will be addressed in this section. For instance: How and why will a shorter term (15-Year) for a Fixed-Rate program help the consumer accumulate equity faster? For any fixed-rate mortgage program, in the beginning of the term, the consumer is mainly paying toward the interest portion of the loan. Then, as the interest portion is paid off, the consumer starts paying more toward the principal, or the price of the home itself. Therefore, the more a consumer pays on the principal, the more equity they have, and because it is a shorter term, it means the shorter amount of time the consumer will have until they are able to pay principal.

What happens if interest rates drop significantly a few years after the loan is secured – would the consumer still have to pay their higher rate for the whole fifteen (15) years? The answer is no because the consumer could consider refinancing as a possibility.

How about the consumer who already secured a 15-Year FRM but is now making less money after a career move–what happens now when the consumer faces new budget constraints? Consider refinancing for a longer term, or for an adjustable-rate loan, both of which may make payments lower. Of course, if the consumer’s financial situation is to the point whereby they are unable to pay any bills, they may wish to consider a debt consolidation.

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