Probably the most common kind of mortgage is the one with a fixed rate. Offering a fixed interest rate from typically one to thirty years this type of mortgage offers financial security for many families. Though fixed mortgage has many advantages, we should remember that it also has some disadvantages. Knowing the ins and outs of a fixed mortgage will help you decide whether such is right for your particular wants and needs.
Residential loans which provide the same interest rate for a predetermined term are referred to as “fixed mortgages.” Mostly they are either fifteen- or thirty-year mortgages. The great advantage of a thirty-year mortgage as opposed to a fifteen-year mortgage is that you’ll have more money left over at the end of each month. If you want to pay off your mortgage over a longer period of time, you should take out a longer mortgage. So, too, the longer you make payments on your mortgage, the more you pay down your interest.
But you might find a fixed rate mortgage that only guarantees your rate for a period of a year or so. Such offers are usually designed for high-risk customers who might not otherwise qualify for a loan. The interest rate is usually quite low to start with but this “teaser rate” does not last long. When the fixed interest rate has run its course, the rate goes on to fluctuate in correspondence with the housing market. Sad to say, that’s not always what you want to have happen. Naturally, one disadvantage of carrying a fixed mortgage is that you will decrease your odds of getting a lower interest rate in the event the housing market enters a slump. If you have an adjustable rate mortgage, the current economic status of the housing market will highly influence rate figures.