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Fixed Rate Mortgages


A fixed rate mortgage is mortgage loan where the interest rate remains unchanged until the term of the loan comes to an end. Many people have adjustable rate mortgages and those can be dangerous. In an adjustable rate mortgage the interest rate can be changed at any time. This means that at any time a borrower’s interest rate can increased which would increase their monthly mortgage payments.

There are three types of fixed rate mortgages they are: the fifteen year fixed rate mortgage, the thirty year fixed rate mortgage, and the biweekly fixed rate mortgage.

A fifteen year fixed rate mortgage is a good option for borrowers who want to reduce their loan balances relatively quickly. It reduces the total interest cost by fifty percent over a thirty year fixed rate mortgage. The major downside to a fifteen year fixed rate mortgage is that the monthly mortgage payment will be a lot higher than a thirty year fixed rate monthly mortgage payment.

A thirty year fixed rate mortgage is the type of mortgage that most borrowers decide to take out. Borrowers like that they will always have the same monthly mortgage payment and that they will have the same interest rate for thirty years. Borrowers are usually told by their mortgage lenders that they will not be penalized for prepaying their mortgages. This means that borrowers can make additional payments to their lenders and shorten the term of the mortgage. The only downside that a thirty year mortgage has is that borrowers will usually pay more in interest costs than if they had taken out an adjustable rate mortgage.

The biweekly payment schedule of a biweekly fixed rate mortgage speeds up amortization. This reduces the amount of interest that the borrower has to pay and reduces the loan term. The borrower will make twenty six biweekly payments which is thirteen monthly payments a year. The payments are automatically withdrawn from the borrower’s checking or savings account. There are a few downsides to a biweekly fixed rate mortgage. The first downside is that it can be hard to coordinate your finances with the biweekly withdrawals that will take place. If you are not carefully then you will incur overdraft charges if there are not sufficient funds in your bank account when the mortgage lender withdraws the biweekly payments. The second downside is that usually mortgage lenders will charge the borrowers fees for making the biweekly withdrawals. The third downside is that biweekly fixed rate mortgages can be costly that is why many borrowers decide instead to take out a thirty year mortgage and just make extra mortgage payments to decease their loan balances.

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