The Best Low Rate Fixed Mortgage
A traditional fixed rate mortgage is an equity builder.
Finding the best low rate fixed mortgage will help build equity in your home faster than taking out an interest only mortgage.A fixed rate mortgage is probably the most recognizable one. Your parents probably had a fixed rate mortgage. Their parents also most likely had the same type of mortgage.
The single largest advantage of a fixed rate mortgage is the predictability of housing costs for the term of the mortgage. Types of mortgages you have more than likely heard about include:
- 30 year Fixed Rate
- 25 year fixed rate mortgages
- 15 year Fixed Rate
- Bi-weekly Payment Mortgages
- "Convertible" Mortgages
When people thought of mortgage many years ago, they usually thought of a traditional fixed rate mortgages usually for a term of 30 years. Volatile financial times have created a whole new range of selections so the traditional mortgage is now one of many choices available. Even still, the 30 year fixed rate type of mortgage may still be the better mortgage choice for your personal circumstances. Compare home equity loans with traditional fixed rate mortgages.
Finding the best fixed rate mortgage deals.
While it offers the lowest payments of all the fixed rate mortgage loans, it also provides for a uniform monthly payment schedule. Lenders now offer 25 year, 20 year, and even 40 year terms as options on mortgages. Just keep in mind that the longer the loan term, the more interest you end up paying long term.
15 year fixed rate mortgages allow home buyers to own their homes outright in half the time with less than half the interest costs of the 30-year term loans. The payments on a 15 year fixed rate loan are typically 10% to 15% higher, which shortens the term and cuts the interest dramatically.
Some home buyers when they wish to refi my house, prefer the 15 year fixed rate mortgage for a couple of reasons. One is so they will have the loan paid off before the kids go to college while others look at owning the home free and clear before they retire.
Compare fixed rate home mortgages.
The biggest disadvantage of the 15 year fixed rate mortgage is the higher monthly payments. But if dramatic savings on interest costs and owning the home sooner are pressing factors for you, then a 15 year fixed rate mortgage is probably a good choice.
The bi-weekly mortgage shortens the loan term to less than 20 years by cutting the payment in half and requiring that payment every two weeks. The bi-weekly payments increase the amount paid yearly by about 8% and effectively forces 13 monthly payments (26 biweekly payments) annually.
Save money and pay less interest.
The shortened loan term substantially lowers the total interest paid. The bi-weekly plan further cuts interest costs by the application of each payment to the amortized principal portion of the loan every two weeks (14 days). By decreasing the principal faster, more interest is saved over the long run. However, your option to lower total interest costs means fewer income tax deductions for mortgage interest.
Qualification for this type of mortgage is based on a 30 year term, and some lenders who offer this type of mortgage loan will allow the home buyer to convert a bi-weekly loan to a traditional 30 year loan penalty free. This is because the loan company collects more interest on the 30 year term, so it is much more beneficial for them than for you. They get more interest and you get a lower monthly payment.
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