Fixed Rate Mortgage

There are numerous mortgage options that are available in the mortgage market today. One of the most popular mortgage options is the fixed rate mortgage. The main reason this option is popular is because most home owners buying a new home will appreciate having stabile and constant interest rates and monthly payments.

What is a Fixed Rate Mortgage?

A fixed rate mortgage is a home loan where the interest rate is set at the initial agreed interest rate and remains the same rate throughout the life of the mortgage. With a fixed rate mortgage even when the interest rate falls, you will still be paying the fixed monthly payments unless you decide to refinance. Most home owners who have a fixed rate home loan are happy with it as the inverse is also true, if the interest rate rises, the monthly payment remains at the fixed rate. The benefit of this type of mortgage option is that you will be able to set your family budget to the set amount and will know how much to allocate for the mortgage payments each month.

People on a fixed income or a budget can benefit greatly from a fixed rate mortgage due to its fixed monthly payments. For people who know how much their disposable income is every month, it provides a stress-free and stabile finance option. Knowing the amount that you have to set aside for the monthly mortgage payments allows you to manage your budget more efficiently without having to stress about unexpected rise in mortgage payments.

Fixed rate mortgages are normally set at a slightly higher interest rate than the adjustable rate mortgages. Similar to adjustable rate mortgages, the early years of the fixed rate mortgage is focused on paying the interest of the loan. During the latter years of the mortgage term, the home owner starts to pay off the principal of the loan.

A conventional fixed rate mortgage has the following characteristics:

  • The interest rate remains the same during the life span of the loan
  • The borrower makes one payment per month or 12 payments each year
  • The monthly payments are constant during the life span of the loan
  • A portion of the monthly payment covers the loan principal, and a portion covers interest

In general, the most common fixed rate home loans are for 15-years or 30-years though a loan for any duration can be negotiated. A loan of a shorter term has advantages over a loan that is of a longer term. This is because the loan is paid off much quicker and the cost of interest is smaller with the interest rates being lower. Some people may consider the higher monthly loan payment of a short-term loan as a disadvantage.

Fixed Rate Mortgage Options

The fixed rate home loan option has other variables or versions of the program that a potential home owner may want to take into consideration. If you have additional questions or do not find the fixed rate mortgage option you were looking for, please contact NationsChoice Mortgage to get more information.

Traditional Fixed Rate Mortgage Options - In general, the most common fixed rate mortgages are for 15-years or 30-years. Although these two terms are most common, many other loan term durations are available. A loan of a shorter term has advantages over a loan that is of a longer term. If you choose a loan duration of 15 years, the loan is paid off much quicker and you often pay less for the interest. Having a shorter loan term will increase the monthly mortgage payment because of the additional cost incurred over the short term, however over the course of the loan you will have paid less on the interest rates. This option may not be ideal for a borrower that cannot consider a higher monthly loan payment.

Bi-Weekly Fixed Rate Loans – A mortgage that is bi-weekly requires two payments every month – one every two weeks – instead of the usual once a month. The bi-weekly mortgage payments can be structured in a way so that each payment is half the monthly payment of the conventional fixed rate mortgage payment. When this is done, the home owner pays the equivalent of 13 monthly payments per year but the interest expense is lowered and the loan is paid off in less time. The 13th payment of the “extra” payment makes it possible to pay off a mortgage that is for a 30 year term within 18 to 20 years. Traditional fixed rate mortgage holders can also take advantage of making the 13th payment or “extra” payment each year which is called a prepayment.

When a fixed rate loan is being applied for, you may consider “discount points”. The term discount points refer to the fees that are paid upfront in order to get a lower interest rate on the loan. One discount point means one percent of the amount of the loan. This one percent usually “buys” the interest rate to go down by 0.25 percent. As an example, if you are hoping to get a loan of $100,000 at a 5 percent rate of interest, you can “buy” 2 discount points at $3,000 to get a lower interest rate of 4.5 percent on the loan.

The amount of the down payment also helps to determine whether you need to pay a PMI or private mortgage insurance. The usual situation is that is you get a mortgage but give only 20 percent as your down payment you will be required to pay private mortgage insurance. The insurance is to protect the lender in case you default on your mortgage. After you have managed to pay 20 percent of the principal of the mortgage, you can then inform the lender and ask them to stop paying the private mortgage insurance or PMI.

Fixed Rate Mortgage Conclusion

A fixed rate home loan is a very good option for purchasing a home if the home owner plans to live in the home for a long period of time. This is because there is a sense of security due to the knowledge that you have fixed monthly mortgage payment amounts that can be factored into the monthly budget and you are assured that the interest rate on your loan will not change. If there are market indications that interest rates will eventually rise, then a fixed rate mortgage can definitely be the better option instead of an adjustable rate mortgage.

How to get a Fixed Rate Mortgage:

If you are considering a fixed rate mortgage to purchase your next home, Nations Choice Mortgage can help you begin the process of applying for a loan. Nations Choice Mortgage has a well-trained team of mortgage specialists that are always available to help you make the best decision with your mortgage-related needs. We understand that choosing the right type of mortgage for your needs is a big decision and we are always here to help you make an informed choice.

To begin applying for a fixed rate mortgage all you need to do is search rates and you will receive a personalized interest rate quote. You can then choose the type of loan and interest rate which fits your needs best. Your mortgage application can also be completed online using our advanced online mortgage application. If you have questions anytime during the online application process, feel free to contact us and we will provide you with all the information you need.

Instant Mortgage Rate Help

Loan Amount: How much do you want to borrow? Example: 150,000 (You can borrow up to 100% of the purchase price of your home. You will find better interest rates at 95%, 90%, and 80% progressively.)

Property Value: This is the purchase price of your property or your best estimate of the appraised value of the property. Example: 175,000.

Loan Type: Selecting Refinance WITH CASH OUT may increase your rate. If you want some extra cash to pay the closing costs on your new loan, this would NOT be considered receiving extra cash.

Escrow/Impounds: Allows you to pay 1/12 of your annual property taxes and homeowners insurance with your mortgage payment each month. Escrowing your taxes and insurance will lower your points by .25%

Property State: Specify the State where the property is located

Property County: Specify the County where the property is located

Todays Rates: These rates are based on the following criteria..

Instant Mortgage Rates

Loan Amount
Property Value
Loan Type
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