If you are new to mortgages or just don’t remember going through the process the last time you financed a home purchase, this article will explain some important features of the loan known as the fixed rate loan or fixed rate mortgage. These are pretty easy to come by and the product that is the most familiar to people purchasing or refinancing homes. A purchase of a home is most likely the largest outlay of funds you’ll experience during your life, so understanding the fixed rate mortgage is important knowledge to have.

These fixed rate mortgages are the most common type of mortgage product. They are not the only type of product, of course, by they are very prevalent. When people speak about getting a home loan, they are usually referring to this type of loan. The fixed rate mortgage product is the one that is probably advertised the most, at least with most state laws, the advertising you’ll here on the radio or see on TV or other media is typically providing information about their lowest fixed rate product.

The fixed rate mortgages have a specific time period with them, such as a 30 year fixed rate mortgage. There are also 15 years which are probably the second most common. I have also seen 20 year and 40 year mortgages. Lenders have different programs that will work with what you are looking for. There are enough lenders out there that it would be uncommon to find a loan officer who couldn’t give you multiple options with your loan duration.

Fixed rate mortgages have the same payment for each period. The benefit here is that you are able to base your monthly budget or even bi-weekly budget from the amount you’ll be paying each month towards your mortgage. Because the rate doesn’t change, neither does the monthly payment. This makes the fixed rate mortgage very predictable.

With a fixed rate mortgage, at the end of the term, your home will be paid off completely. Several mortgage products have a balloon payment at the end of the term which means you’ll have a larger lump sum, usually a multiple of 10 to 20 times your monthly, or in the event of some interest only products, the principal would be due at the end of only a couple years into the mortgage product which would either require you to pay off the home completely or refinance the balance.

With a fixed rate mortgage, a percentage of your payments each month will go towards the interest and the rest will go towards the principal. This is not an even amount. What I mean is that the the first few years of your mortgage, the majority of the monthly payment goes to pay the interest and the smaller percentage goes towards the principal. Of course you can make extra payments on the principal which means the interest payment will decrease simply because the interest paid is done so on the balance, which if you pay more towards the principal above and beyond the monthly payment, there will be a lower balance due and less interest. This doesn’t mean your monthly payment will change, but it will decrease the amount of interest due and increase the percentage of your payment that is applied to paying down the principal.

Establishing your first fixed rate mortgage or even refinancing for the 10th time shouldn’t be a complicated process. The key to getting this done is to find a loan officer you can trust who will work with you and educate you as needed so that you understand what you’re paying for. Because this is such a large dollar amount that you’ll typically be paying for a home, there are ways that you can get caught paying more than you should and even small percentage changes over the life of the loan may result in you paying thousands of dollars more in interest. There are a lot of mortgage calculators out there as well you can use to give you some rough estimates.

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