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  • Fixed Rate Mortgages

Fixed Rate Mortgages

What Every Home Buyer Should Know Before Choosing a Fixed Rate Mortgage

Purchasing a home is a major commitment and requires a substantial amount of research before making any decisions. The first significant step in buying a house is getting pre-approved for a mortgage. Many home buyers are quickly confused by the number of options available. Although there are a large number of mortgage products on the market today, most of them fall into one of two categories: fixed and adjustable rate loans. For most first-time buyers, a Fixed Rate Mortgage is the ideal choice.                                      fixed rate mortgage in san antonio texas

Having a fixed rate makes planning a budget a lot easier. The mortgage payment will be exactly the same for the life of the loan. It’s important for anyone buying a home to shop around to find thelowest rate. The interest rate on this type of loan will not change. This can be an advantage as well as a disadvantage. If rates go up, the loan will be a bargain. However, if rates go down, a family with a fixed rate on their home loan may pay more than their new neighbors. It may be possible to refinance to get a lower rate, but there are costs associated with refinancing the loan.

A Fixed Rate Mortgage is best for families who plan to remain in their home for several years. With a fixed rate, the homeowner accumulates equity at a stable rate. The longer the homeowner lives in the house, the less they will pay in monthly interest. As time passes, more and more of the monthly payment will apply towards principal balance. This is predictable with a fixed mortgage, but not with an adjustable rate mortgage loan. Although adjustable mortgage loans typically have lower initial interest rates often referred to as the “teaser rate”. They have the potential to rise far above the rate a homeowner with a fixed rate loan will pay.

The term chosen for the loan will determine and affect the amount of the monthly mortgage payment. Home buyers who select a 30-year term will have smaller payments than those who plan to pay off their loan in as little as 15 years. The mortgage rates for short term loans are also slightly lower, which enables home buyers to build equity faster as they pay off the principal balance on their loan more quickly. Those who would rather make a higher payment than pay a lot of interest often choose a shorter term loan. If their financial circumstances change over the course of the term, refinancing to a lengthier term may be possible.

Longer terms are available in some markets where housing prices can make it difficult for a family to afford the payment on a 30-year mortgage. While choosing a term longer than 30 years enable families to commit to a smaller monthly payment, it also means they’ll have to pay more interest over the life of the loan. Refinancing might not be possible unless the market changes significantly because homeowners with these mortgages take longer to build equity. Buyers have a lot of options available to them and must choose the type of mortgage that will be best for their current and future financial needs. Although not available in all markets, an extended term is beneficial to younger home buyers who don’t mind paying longer in return for a lower monthly payment.

For more information about the features and benefits of a Fixed Rate Mortgage, contact our Home Loan Specialists at 210-802-4665.

A LEADER IN THE MORTGAGE LENDING INDUSTRY FOR MORE THAN TWENTY YEARS