A fixed rate mortgage is a loan with an interest rate that does not change over the term of the loan. The distinguishing factor of a fixed-rate mortgage is that the interest rate over every time period of the mortgage is known at the time the mortgage is originated.
The term fixed rate mortgage refers to the payment amount that is made each month on the principal and interest and is paid to a lender. It is a type of loan that was created by the Federal Housing Administration to provide borrowers with a steady payment over the course of the loan.
Your payment of principal and interest will not change over the years. However, if you escrow for taxes and insurance, you might find that your payments adjust to cover those cost changes and that could result in some increase in monthly payments.
This type of mortgage usually is found in mortgages of 15 or 30 year terms but we provide several more options. Some have shorter mortgage terms as well.
There are two main types of fixed rate mortgages, a 15 year term and 30 year term.
With a 15 year term, the buyer pays less total interest on the loan and the interest rate is lower. However, the monthly payments are higher.
With a 30 year term, the amount of the monthly loan payments are lower. However, the buyer has a higher interest rate and pays more total interest over the life of the loan.
We also offer several other year term options. Contact us today to learn more.
If you are thinking about applying for a fixed rate mortgage, here are some things to consider.
Are you planning on living in the home a long time?
If you are planning on selling or refinancing soon, a fixed rate mortgage might not be the loan for you.
Are you okay with a locked interest rate?
Once you get approved for the loan, the interest rate is locked down. This means to take advantage of lower interest rate, a buyer will need to refinance.
While fixed rate mortgages are more common, especially since the mortgage crisis, they are more expensive than adjustable rate mortgages. The main reason for that is the fact that the lender needs to make sure they are protected from huge interest rate swings in the market. For that reason the interest rates tend to be higher.
Although it really depends on the length of time you plan to be in the home you are buying, a fixed rate mortgage usually is the best choice to hedge against interest rate fluctuations in the long run.
To qualify for a fixed rate mortgage, a borrower has to contact a lender that offers fixed rate mortgage home loans. Just like other home loans, the borrowers credit score, employment history, monthly income, monthly debts and credit history will be checked.
Contact Meridian Mortgage if you would like to apply for a fixed rate mortgage loan.
For more information on applying for a fixed rate mortgage, contact Meridian Mortgage at 317-968-9500 or contact us online.
Meridian Mortgage Solutions is a subsidiary of Endeavor Capital, LLC Licensed through the Indiana Department of Finance and Insurance. License #17519 & 17520, NMLS#222524
Endeavor Capital, LLC and its DBA's are not acting on behalf of or at the direction of HUD/FA or the Federal government.
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