Fixed Rate Mortgages
Today there are many houses that you can buy. As such, there also several options on how to actually buy that house. Specifically, today we will discuss fixed rate mortgages, the pros and cons of 30 and 15-year fixed rate mortgages and the differences in interest paid over the life of the loans.
Generally, fixed rate loans are the most popular lending option. This is for two reasons: 1. Homeowners hate the idea that their house payment is rising and falling with interest rates. 2. When interest rates are low fixed rate mortgages can be extremely affordable.
There are two types of fixed rate mortgages: 15 year and 30 year. Each have their own advantages and disadvantages which we will discuss. 15 year loans can build equity in your home much faster than a 30 year loan because of shorter interest amortization schedules. On the other hand, your monthly payments can be significantly higher than those with a 30 year loan. 30 year loans can offer lower monthly payments due to the longer interest amortization in which frees up money that borrowers can invest elsewhere. However, borrowers build equity at a much slower rate than that of a 15 year loan.