Fixed Rate Mortgages are products for mortgage loans that the FHA, or Federal Housing Administration, first created. In this type of mortgage, the interest rates in effect on the mortgage note stay at the same level during the entire life of the loan. This stands in stark contrast to loans where the interest rates are adjustable, or floating. There are also hybrid types of loans that involve fixed rates for a portion of the loan’s life.
Fixed rate mortgages will have monthly payments that must be made to keep current on the mortgage. Besides the monthly payment there are property taxes and property insurance costs. These are typically set up in escrow accounts. With such escrow amounts, these are likely to change every so often. Still, the main share of the payments, which are associated with interest and principal on the mortgage, will stay the same.
Figuring up the monthly payments with fixed rate mortgages is relatively easy. You will have to acquire three pieces of data to do so. These are the interest rate with compounding of interest period, mortgage term, and amount of loan.
Fixed rate mortgages are also known by their nickname of plain vanilla mortgages. They have this moniker because of how simple they are for borrowers to understand. Such fixed rate mortgages do not entail the many risks and perils associated with adjustable rate mortgages that include pre set teasing rates or Adjustable Rate Mortgages. As such, Fixed rate mortgage default rates and foreclosure rates are commonly far lower than are these more experimental and risky mortgage products.
Several terms are commonly associated with Fixed Rate Mortgages. These include the fully indexed rate and the term. Fully indexed rates are the interest rate index plus the margin charged by the lender. Such a fully indexed rate proves to be the actual interest rate for the loan’s entire life.
The term represents the amount of time that the fixed rate loan covers. This is not the same thing as the number of payments. Thirty year terms might have thirty payments if you were on an annual payment plan, or it might alternatively have 360 payments on a more usual monthly payment plan
The most popular and proven form of home loans and mortgage products within the United States are undoubtedly these fixed rate mortgages. Among the various mortgage terms that can be acquired, the most prevalent ones are either thirty year or fifteen year mortgages. Both shorter and longer time frames can be had with fixed rate mortgages.
These days, even forty and fifty year mortgages are presently offered. They are especially utilized in places with housing prices that are exceptionally high, as thirty year mortgage terms do not prove to be affordable for the average income family in such scenarios.
In contrast to fixed rate mortgages are various other types. These include graduated payment mortgages, balloon payment mortgages, and interest only mortgages. These unusual other types of mortgages commonly get borrowers into trouble, which is why they are not nearly so popular as are the fixed rate mortgages.