If you are planning to purchase a home, the type of interest rate you choose will be an important factor when you are considering what type of mortgage to get, and will also ultimately determine the amount of money you will spend on your monthly payments. One common interest rate option is a fixed rate mortgage, in which the interest rate of the loan remains the same throughout the life of the loan. The loan specialists at North Star Mortgage Network, Inc. can help you determine if a fixed rate mortgage is the right financing option for your situation in Jacksonville, Florida. Read on to learn more about this type of mortgage.
Fixed Rate Mortgage Basics
The two main types of mortgage rates are fixed rate and adjustable rate, (ARM). In an adjustable rate mortgage, the interest rate fluctuates throughout the duration of the loan, but in a fixed rate mortgage, the interest rate stays constant. Fixed rate mortgages are commonly chosen by homebuyers because they provide a sense of stability due to the fact that the monthly mortgage payments are predictable, and the borrower knows what to expect to pay every month. Fixed rate mortgages come with many term options, and can range anywhere from 5 to 30 years. Essentially, the longer the loan term, the lower your monthly payment will be. Fixed rate mortgages do tend to have higher initial rates than adjustable rate loans, however, the adjustable loan rate usually becomes higher after a fixed period of time.
The Advantages and Drawbacks of a Fixed Rate Mortgage
Fixed rate mortgages offer many benefits for a borrower. Because the payment is the same each month, it is a safer option for a borrower because it makes it easier to budget for, especially if an unexpected life event happens, such as a job change, divorce, or health issue. Depending on the terms you are able to secure for your loan, your payments could be lower over a longer time period and allow you to qualify for a larger loan. Additionally, with each mortgage payment, you are paying off a part of the principal loan each month, increasing your home equity.
There are some possible drawbacks to a fixed mortgage, including inflexibility, and if interest rates drop, you will need to refinance in order to get a better rate, which includes paying for closing costs again. Within the first few years of a fixed rate mortgage, your payment will mainly go towards the interest, causing it to take longer to pay off the principal balance of the loan.
Getting Help With a Fixed Rate Mortgage
If you are interested in learning more about how to finance a home with a fixed rate mortgage in Jacksonville, Florida, contact North Star Mortgage Network, Inc. We can work closely with you to determine the best financing option for your unique situation.