Monday, June 5, 2017

Benefits of fixed rate mortgage loans

Benefits of fixed rate mortgage loans
Of the many mortgage loans available, the fixed rate mortgage loans are the most popular. This is because though loan to value ratios have fluctuated over the years, with interest rates moving up and down, this fixed rate mortgage loans don’t change and provide security to the borrower.
With a fixed rate mortgage loan, the borrower can repay the loan amount through equal monthly payments, throughout the span of the mortgage loan. The term for the mortgage loan can be anything from 10 to 50 years, as decided by the borrower and lender. However, the most common term is a 30 year period.In the case of fixed rate mortgage loans, the borrower has to make repayments first towards the interest and then towards the principal amount. That is the motivation why all through the first few years, most of the payment the borrower makes is channeled towards the interest of the loan. Consequently, towards the end of the term of the fixed rate mortgage loan, most of the payment is channeled towards payment of the principal amount.
The borrower is secure with a fixed rate mortgage loanWith so much to offer, fixed rate mortgage loans have lots to offer; the main being the fact that they offer the security of the borrower knowing how much they actually end up paying every month for principal and interest.With the interest rate being a fixed one, any increase in the overall interest rate will not affect the borrower at all. Consequently, if overall interest rates drop, the borrower’s payment still remains the same, unless the borrower decides to refinance into a mortgage loan with a lower rate.

Another benefit worth mentioning here is that the borrower can make larger monthly payments to work at reducing the principal amount. This will decrease the balance of the principal faster. And by making an addition payment towards the mortgage loan will lead to a reduction of the amortization period of the loan. However not more than one additional payment should be made in a month.

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