Fixed rate mortgages offer a loan for which the interest rate will remain the same throughout the entire term for the original borrower. When a borrower agrees to a fixed rate mortgage the combined Principal and Interest payment does not change. However, the amount directed towards principal increases from month to month causing the amount paid towards interest to decrease. The homeowner will pay the most interest with their first mortgage payment and the least amount of interest with their last mortgage payment.
Why choose Fixed-Rate Mortgages?
With a fixed rate mortgage, your interest rate does not change and your payment does not change. Traditionally, this has been the most popular mortgage when interest rates are low. With a fixed rate mortgage, you calculate how long it will take to pay off all the principal and interest, and you arrive at a monthly payment.
The major advantage of fixed rate mortgages is that they present predictable housing costs for the life of the loan. If you'd like the peace of mind that comes with a stable interest-rate payment, then a fixed-rate mortgage may be the ideal choice.
Generally, you'll find that fixed rate mortgages are the right choice if:
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