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Fixed Rate Mortgage Pros And Cons In Detail  

 

There are a lot of loan options out there if you are looking to buy a new home or to get a mortgage refinance. Most of the loans that are available to you will fit into the category of an adjustable rate mortgage (ARM) or a fixed rate mortgage. When comparing the two types of loans, there is not one that is better than the other, but they do both have some pros and cons. When you understand the pros and cons of each, you will better be able to make the decision of which type of loan to get. 

 

A fixed rate mortgage is the most common type of loan because it creates a security for the borrower. With a fixed rate mortgage, the interest rate will not adjust unless they decide to do some refinancing. Thirty year, twenty year, and fifteen year mortgages are pretty common for a fixed rate mortgage, but there are other terms offered by some lenders, including a forty year or a ten year loan. Knowing that your interest rate will never become higher can help you to always have a budget and be able to stay within your budget. The monthly payment will always be the same unless your homeowner’s insurance and property tax are included in the payment each month because those two things might cause the payments to go up or down. 

 

At the beginning of the loan is when most of the interest gets paid from your monthly payments, with the principal being paid off at the end of the term. If you are able to pay extra payments each month, you will notice that the extra goes straight to the principal, meaning that you will decrease the loan amount and also decrease the length of the term of the loan. With a fixed rate mortgage, you can get mortgage refinancing, loan purchasing, and even a bad credit mortgage. Talk to a loan officer about these different possibilities so that you know what you should be getting that will be the best for you. 

 

While there are mostly pros for a fixed rate mortgage, there is one main con. If you want to pay down the mortgage, a fixed rate might make it too high for you to make extra payments. This is why people get adjustable rate mortgages, because they have much lower rates in the beginning so that you can make those extra payments.