Fixed Rate Mortgages
Fixed rate mortgages have an interest rate that is 'fixed' at the same rate for the life of the loan. This used to be the most common type of mortgage -- probably the sort of mortgage your parents had. With the interest rate fixed for the life of the loan, your monthly payment will stay the same for every payment. You are protected if interest rates rise while you're paying off your house. This is different than an adjustable rate mortgage where the interest rate you pay goes up and down with the market. With an adjustable rate mortgage, your monthly payment goes up or down along with the interest rate.
Having a fixed rate mortgage allows you to know exactly what you have to pay each month for the life of your loan. The last payment will be exactly as much as your first payment. Having a fixed rate mortgage allows you to budget your money without having to worry about changes in the stock market or interest rates. You are protected if rates go up, your payments will stay the same.
The disadvantage to a fixed rate mortgage is that interest rates may fall below what you have agreed to pay, making your monthly payment higher than you would have paid with an adjustable rate mortgage. But, if interest rates drop dramatically while you are paying off your fixed rate mortgage, you may be able to refinance your house -- that is you get a new mortgage on your house at the lower interest rate and use the money to pay off the first, higher-rate mortgage. Be careful with your first mortgage, many lenders penalize you for paying off your mortgage early.
Fixed rate mortgages are usually given for either 15, 20 or 30 years. A loan with a shorter term increases your monthly payment but can save tens of thousands of dollars over repaying the same amount over 30 years. Traditionally mortgages require one payment per month. Some lenders now offer biweekly mortgages that let you make a half-payment every other week. This means you make 26 half-payments every year -- equivalent of making 13 monthly payments. With the extra payment every year, your mortgage amortizes much faster than it would if you were making 12 monthly payments per year.
It pays to shop around for a mortgage to get the terms you want. Interest adds up over the life of the loan, a mortgage with a
slightly lower interest rate can save you thousands of dollars over the life of the loan. The mortgage business is very
competitive, be sure to get several quotes from different lenders and compare them carefully to find the best deal. There are
several websites that will let you submit a mortgage application to several banks at once -- free. The services listed below
are all free, there's no credit check and there's no obligation:
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Ameriquest Mortgage works with borrowers
who have less than perfect credit. They have over 150 branches nationwide, you can apply at a branch or online.