Today, having a fixed rate mortgage is no longer the only option. In the past, people purchased homes for the long haul, typically. Now, with so many people looking to make money by getting into and out of a property quickly, adjustable rate mortgages are also a popular option. Yet fixed rate mortgages still appeal to a large segment of the homebuying population. A fixed rate mortgage is designed specifically to benefit people who plan to settle down and stay in their houses for a long time. Initial interest rates are usually higher than those of adjustable loans. However, having a fixed rate ensures that a borrower will not be forced to deal with rising interest and rising monthly payments each year. A large portion of people who pay mortgages choose to go with a fixed rate. The fact that a fixed rate loan is easier to secure than an adjustable rate loan has a lot to do with it. Also, many people simply cannot handle the uncertainty that comes with a fluctuating loan. A person with a fixed rate always knows what he has to pay in interest and what he needs to pay to bring down the principal throughout the entire loan term. A lot of people also just want to believe that once they buy a home they’re going to stay in it.
Choosing A Long-term or Short-term Fixed Rate Mortgage
The choice between a long-term and short-term mortgage is not a choice that everyone gets to make. Short-term mortgage loans are often much harder to get, because a person’s credit rating has to be better than it does for most long-term loans. However, for those who have the option, choosing one over the other depends on a person’s priorities. Short-term fixed rate mortgages usually span 15 years. During that time, a person will make higher monthly payments, but he will have a lower APR. The lower rate of interest and the shorter loan duration means that he will actually pay thousands of dollars less in overall interest than a person who has a long-term fixed rate mortgage. Long-term loans, usually lasting 30 years, let people make lower monthly payments. The decreased monthly obligation can make day-to-day living a little easier for a lot of people.