A fixed rate loan or mortgage is a loan that has an interest rate that stays the same throughout the life of the loan. That means it’s not going to increase or decrease so you will always know what to expect on the payment side.
Whenever you take out a loan whether it be fixed rate or variable rate, there will be interest included. That is the amount you must pay back with the loan itself. The interest included on a fixed rate loan is calculated into the payments so that when the term of the loan is over, you’ve paid that back along with the interest. This may be the safer route since you know the rate will remain static, but that safety can sometimes come with a cost. These rates can sometimes be higher than a variable rate so you can pay more over the life of the loan for that certainty of a consistent payment.
Types of Fixed Rate Loans
Fixed rate loans are typically found in a 30-year fixed rate mortgage and can be found with your standard lender when you are choosing to purchase a home.
Buying a home is not the only way to get a fixed rate loan. You can also find these types of loans when you are purchasing a car but the term is much shorter since you are buying something at a much lower value than a home.
Another type of fixed rate loan is a personal or student loan which you will have a monthly payment to help pay down the balance over time.
Other Options Are Available
If you are researching options and want to know your other choices, you may look into a variable or adjustable interest rate loan. These types of loans don’t have a set amount of interest which means your monthly payment will also vary over the course of the loan. The interest rate will fluctuate with the market so you may have a lower interest at the beginning of the loan but it can increase over time.
There is no way to know whether your interest will increase or decrease but if you are in a market where the interest does decrease, you can save some money over time as you pay back the loan.
It is important to discuss these options with your lender when you are choosing your type of loan to make sure whichever option you choose is best based on your finances and personal needs. If you would like to discuss these options with an expert at North Georgia Lending in Cumming, we would be happy to help and make sure you have all the information needed to make the best decision for you and your family.
Contact Us Today
We know figuring out your financing options can be overwhelming and even confusing at times especially when it comes to terms like fixed and variable. But don’t let that stop you from getting all the information you need from our team. We are here to help and answer any questions you might have so reach out to North Star Mortgage today!