Articles & Information Resources Fixed Rate Mortgages
Fixed rate mortgages are mortgages for which the interest rate is fixed over the term or life of the loan i.e. it doesn’t change. A fixed rate mortgage has the same exact payment (principal + interest) over the life of the loan. Fixed rate mortgages are a good choice when interest rates are low, especially now, because once you obtain a fixed rate mortgage, you don’t have to worry about rising interest rates, and for many, that offers a lot of financial security to know that their mortgage payments will not increase over time.
Advantages:
- Interest is fixed over the life of the loan.
- Flat payments are easier to track and budget.
- If you plan to stay in the house for a long time, FRMs generally cost less (interest expense) over time than Adjustable Rate Mortgages (ARMs) especially in increasing interest rate environments.
Disadvantages:
- Because FRMs carry higher interest rates, some home buyers may not qualify for a fixed rate loan or may not be able to afford a home at a particular price point through a FRM.
- Fixed payments may not conform to the income pattern of some home buyers.
- If you are planning to stay in a house for a few years, due to lower upfront interest rate on ARMs, you may be better off by choosing an ARM.
