Is a Fixed Rate Mortgage for You?

By Martin Lukac

A fixed rate mortgage is the most common type of mortgage. With a fixed rate mortgage your payments will stay the same throughout the term of your loan, which is usually 15 or 30 years long. You will make the payments to the lender each month for the term.

By choosing a fixed rate mortgage you will be able to avoid the unstable real estate market. You will never have to worry about your payments going up and down wit the interest rates, this is appealing to buyers because you will be able to budget much easier. So if you are thinking about buying a home do it when the interest rates are low and choose a fixed rate mortgage. This way no matter how high the interest rates go you will never have to pay them.

Once you have decide to choose a fixed rate mortgage loan all you have to do is choose which one. The 15 year or the 30 mortgage? A 30 year loan is good because your payments will be smaller since the interest is spread out over a longer period of time. And with this option you can take all of the extra money that you save each month and invest it in investments that will bring a good return and even though you will be paying more in interest with the 30 year mortgage you will also be able to deduct more off of your taxes.

There are some drawbacks to the 30 year fixed rate mortgage though such as the fact that you will be building equity in your home much slower than with a 15 year mortgage. When you choose this type of mortgage the bulk of your first few years payments will be paying off the interest rather than the principle balance. And with this mortgage plan you will be paying significantly more in interest.

If you choose a 15 year fixed rate mortgage you will be able to build equity in your home much faster than with the 30 year though the payments each month will be higher. And the amount of interest that you will be paying overall for these loans is much les than with the longer term mortgage loan, which makes this an appealing choice to many. The main drawback to a 15 year fixed rate mortgage is that since the payments are higher you may not be able to afford as big of a house.

With a 30 year fixed rate mortgage you will be paying over double the amount of interest than with a 15 year mortgage. This could add up to hundreds of thousands of dollars. And the difference between the monthly payments on each type of loan is a few hundred dollars each month. Say it averaged out to about $350 a month, if you were to choose a 30 year mortgage and then invest the difference you could make a lot of money, a lot of money. You could then use this money to pay off the principle balance of your mortgage that much sooner.

Martin Lukac, represents http://www.RateEmpire.com, a finance web-company specializing in real estate/mortgage market. We specialize in daily updates, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies! Visit http://www.RateEmpire.com today

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