here are several types of than the former.
mortgages offered by
lenders in the market. The Each type of fixed rate mortgages
most common of these types is certainly has its own advantages
fixed rate mortgages. Fixed rate and disadvantages. Here are some
mortgage loans are characterized of them.
by fixed rates and monthly
payments that are generally for a 30-year Fixed Rate Mortgage -
15-year and 30-year periods. Advantages and Disadvantages
Fixed rate mortgages are popular A 30-year fixed rate mortgage
in the consumer market because of gives consumers the opportunity
its stability. Most consumers are to borrow money on a long-term
hesitant to get house loans where basis. They do this without
the rates fluctuate with the having to worry about the change
changing interest rates of the that might occur in fixed rate
market. Fixed rate mortgages are mortgage interest rates or
generally very affordable, payments of such.
especially when rates are low.
Because the interest of a 30-year
Consumers of fixed rate mortgages fixed rate mortgage is amortized
are faced with having to choose over a longer period, the monthly
between a 15-year fixed rate payments for this are lower than
mortgage or a 30-year fixed rate those on 15-year loans. Lower
mortgage. Some prefer 15-year monthly payments on 30-year fixed
fixed rate mortgages because of rate mortgages give consumers an
the shorter duration. Other extra resource which they can
consumers choose 30-year fixed pour into other worthy
rate mortgages because the investments.
payments are considerably lower
On the other hand, this could One of the advantages that
also cause a slight disadvantage attract borrowers into taking a
for 30-year fixed rate mortgage 15-year fixed rate mortgage is
borrowers. The overall interest the fact that amortization
bill of a 30-year fixed rate periods for this type of loan are
mortgage is much higher because usually shorter. This allows
of the long amortization period. 15-year fixed rate mortgage
And because payments for 30-day borrowers to build equity much
fixed rate mortgages are usually quicker. And with a 15-year fixed
used to pay up the interest rate mortgage, the overall
rather than the principal at interest bills are low - at
first, borrowers will be building least, considerably lower than
up their equity at a slower pace. those of longer-term loans.
Interest rates of a 15-year fixed
rate mortgage are also lower than
The high interest rates of 30-day 30-year loans.
fixed rate mortgage loans do not
necessarily stop consumers from The disadvantages however include
taking this type of loan. They significantly higher monthly
reason that higher interest bill payments, especially when
for 30-day fixed rate mortgages compared with 30-year fixed rate
increases the amount they can mortgages. This setback of having
deduct at tax time. This could a 15-year fixed rate mortgage may
potentially reduce or perhaps, restrict home buyers to smaller
even eliminate their federal houses than they might be able to
income tax liability. afford with longer-term loans.
15-year Fixed Rate Mortgage - There are also other factors to
Advantages and Disadvantages consider when choosing which type
of fixed rate mortgage you want
to take. Keep in mind that you In this way, fixed rate mortgages
can actually do a prepayment for may even be paid off sooner than
your fixed rate mortgage, that the projected term.
way, the principal amount may be
significantly reduced each month.
About the Author:
Jenny Lane is a banking specialist who writes on related financing and banking industry topics. Find out more about the latest in banking industry at http://bankingtrends.com
Source: www.isnare.com
