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  • Fixed Rate

    • A fixed rate mortgage is one whereby the interest rate is fixed for the entire term of the loan. The most popular fixed rate mortgage is a 30 year fixed one.

      This means that the interest rate the borrower qualifies for and is given by the lender is fixed for the entire 30 year term. At no time can the interest rate or terms of the mortgage change. This is the most secure and low risk way to take out a mortgage.

    • Benefits

      The benefit to a fixed rate mortgage is the stability of knowing what your monthly payment will be based on a rate that will never change. You can then know what to expect each month and budget for that payment and plan accordingly.

      Furthermore, you are not bound to pay that minimum payment and can make additional payments monthly or annually in order to pay down the balance even quicker.

      Many borrowers who took out adjustable rate mortgages and bypassed fixed rate mortgages paid the price when the housing bubble burst and equity evaporated while at the same time those adjustable rate mortgages began adjusting.

      This caused payments to go up, according to market rates and pre-determined margin terms, which caused many borrowers to default. They were stuck between a high payment and an inability to sell the property.

      Those that stuck with a fixed rate mortgage were able to avoid this adjusting increase in rates and payments and had a less likliehood of defaulting.

    • DownSide

      Like with anything there is always some sort of downside and in this case getting a higher interst rate in exchange for a fixed term is the downside or drawback to a fixed rate mortgage.

      Those that took adjutables got a lower introductory rate and lower payment as opposed to those that went for the fixed rate mortgage. Taking the adjustable did in fact help those that were unable to qualify at a higher fixed rate.

      This enabled access to credit to those that would not normally qualify and gave the prospective buyer more purchasing power.

    • Conclusion

      A fixed rate mortgage is one that is stable and predictive. Carries no inherent risk as the monthly payment will be fixed for the term of the loan (30, 25, 20, 15 and 10