Is A Fixed Rate Mortgage The Right Choice?

Understanding a FRM is simple: it is a fixed rate mortgage with as little as ten or as much as forty year’s maturity. The longer the maturity, the lower the monthly payments will be, but the negative side is that the borrower will be paying for a long time. The best thing is to find the right balance between the mortgage you can afford for the shortest FRM.

Longer term FRMs can cost a lot more over time than shorter term loans. If you look at any of the tables on the internet, you can see that you will pay twice as much per month for an FRM with a term of ten years as for one with a maturity of forty years.

Banks will also charge a higher interest rate on long term FRMs because their interest rate exposure is larger.

Fifteen and thirty year fixed rate home loans are the most popular, and for reasons cited above, the rates on fifteen year mortgages are usually lower than for the longer mortgages. By these standards, it can’t be a surprise that the 40 year term carries the highest interest.

This is the reason a lot of borrowers choose the 15 FRM.

Once your mortgage broker has calculated the amount of mortgage you can expect to pay on a fifteen year mortgage, you can then decide if this is affordable. If you can’t afford this mortgage payment, you can then move into a longer maturity until you meet the amount you have budgeted for your mortgage.

If you do take a longer term FRM for current affordability, you can always pay more down to reduce the principal. This is often a good idea for a homebuyer who can only afford ”x” today, but as his income increases, can afford to pay a higher monthly payment. Any extra payments you can make on your home loan will serve to shorten the maturity of the mortgage.

If you consult with a mortgage consultant, he can tell you exactly how much you will have to spend on your home loan each month. These payment charts are easy to locate and use, but a mortgage consultant may make the process easier for you, without any obligation on your part.

The ideal solution is to find the balance between the term of the Fixed Rate Mortgage that will be most affordable for you, and at the same time maintaining the interest rate as low as possible.

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