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An Introduction To Fixed Rate Mortgages For The First Time Buyer

By Nick Hatton

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Published: 12Mar2012
Word count: 537
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Mortgages generally fall into two main categories. These are residential and commercial. A residential mortgage is intended to help homebuyers purchase a residential property, typically a house, apartment or condominium. A commercial mortgage on the other hand, is intended to help a business owner purchase a property for commercial use. Rates and terms vary depending on the type of mortgage, the mortgage lender, the geographical region you are in and what the current interest rates are.

Fixed mortgages are the most popular mortgages. With a fixed mortgage rate the monthly mortgage payment stays the same for the entire life of the loan (excluding taxes and insurance). This makes fixed rate mortgages the most desirable for home owners.

Fixed mortgages are as traditional a mortgage as you will find. Many new home owners appreciate the fact that monthly payments they'll pay will be pre-determined and set. It's a payment structure that eliminates a lot of anxiety. The basis of any loan however is finding the best mortgage deals that are available to you. A fixed rate mortgage can offer a mortgagor great benefits but if interests rates are at a premium they can also cost you plenty of money.

In a fixed rate mortgage, the interest rate you pay does not change over the life of the loan. This is true of the 40 year, 30 year, and 15 year fixed mortgages. Regardless of market changes, you will have the same interest rate and payment for either 40, 30, or 15 years.

Fixed mortgages are easier to keep up on. The payment amount that you have for your first month will be the same payment amount you have for the rest of your payments. Of course, your final payment may be a little more or less depending on what you have owe to the bank. Since you will always know what the majority of your payments will be, you can easily plan for the future. You can plan how you are going to increase your principal payments in order to reduce your debt or you could finally plan that family vacation you have always wanted to take.

With fixed mortgages, you never have to worry about increasing payments, unless you have your mortgage lender escrow your taxes and insurance as those things may experience slight increases over time. The important thing, though, is that you will never have to fear what the economy or mortgage market is doing and how it will affect your interest rate. Even when times are at their worst, you will always have the same interest rate and therefore you will have the same principal and interest payments. You will never find yourself opening your mortgage statement one month and feeling surprised by the payment amount you see on the paper.

By taking a fixed rate mortgage in this current low interest climate, you can insulate yourself against future increases in interest rates. By doing so, you can save a significant amount of money, especially if the rates increase substantially over the next few years. You will get maximum protection as well as the greatest impact of such savings when you opt for long term mortgages such as 30 year fixed mortgages.

Advice provided by Nick Hatton, on behalf of Mortgage International with the aim of making mortgage solutions simple.

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