Discover The Advantages of Fixed Rate Mortgages
Lorna Mclaren


There are several types of mortgages offered by lenders in the
market. The most common of these types is fixed rate mortgages.
Fixed rate mortgage loans are characterized by fixed rates and
monthly payments that are generally for a 15-year and 30-year
periods.

Fixed rate mortgages are popular in the consumer market because
of its stability. Most consumers are hesitant to get house loans
where the rates fluctuate with the changing interest rates of the
market. Fixed rate mortgages are generally very affordable,
especially when rates are low.

Consumers of fixed rate mortgages are faced with having to choose
between a 15-year fixed rate mortgage or a 30-year fixed rate
mortgage. Some prefer 15-year fixed rate mortgages because of the
shorter duration. Other consumers choose 30-year fixed rate
mortgages because the payments are considerably lower than the
former.

Each type of fixed rate mortgages certainly has its own
advantages and disadvantages. Here are some of them.

30-year Fixed Rate Mortgage – Advantages and Disadvantages

A 30-year fixed rate mortgage gives consumers the opportunity to
borrow money on a long-term basis. They do this without having to
worry about the change that might occur in fixed rate mortgage
interest rates or payments of such.

Because the interest of a 30-year fixed rate mortgage is
amortized over a longer period, the monthly payments for this are
lower than those on 15-year loans. Lower monthly payments on 30-
year fixed rate mortgages give consumers an extra resource which
they can pour into other worthy investments.

On the other hand, this could also cause a slight disadvantage
for 30-year fixed rate mortgage borrowers. The overall interest
bill of a 30-year fixed rate mortgage is much higher because of
the long amortization period. And because payments for 30-day
fixed rate mortgages are usually used to pay up the interest
rather than the principal at first, borrowers will be building up
their equity at a slower pace.

The high interest rates of 30-day fixed rate mortgage loans do
not necessarily stop consumers from taking this type of loan.
They reason that higher interest bill for 30-day fixed rate
mortgages increases the amount they can deduct at tax time. This
could potentially reduce or perhaps, even eliminate their federal
income tax liability.

15-year Fixed Rate Mortgage – Advantages and Disadvantages

One of the advantages that attract borrowers into taking a 15-
year fixed rate mortgage is the fact that amortization periods
for this type of loan are usually shorter. This allows 15-year
fixed rate mortgage borrowers to build equity much quicker. And
with a 15-year fixed rate mortgage, the overall interest bills
are low – at least, considerably lower than those of longer-term
loans. Interest rates of a 15-year fixed rate mortgage are also
lower than 30-year loans.

The disadvantages however include significantly higher monthly
payments, especially when compared with 30-year fixed rate
mortgages. This setback of having a 15-year fixed rate mortgage
may restrict home buyers to smaller houses than they might be
able to afford with longer-term loans.

There are also other factors to consider when choosing which type
of fixed rate mortgage you want to take. Keep in mind that you
can actually do a prepayment for your fixed rate mortgage, that
way, the principal amount may be significantly reduced each
month. In this way, fixed rate mortgages may even be paid off
sooner than the projected term.

Get more information about mortgages and other financial issues
at http://www.123-debt-consolidation-loans.com


See Also:

Index of All Info on Home: Loans, Insurance & Selling


    Search our site for any Home, Lawn or Garden Info

Web      Search This Site