A fixed rate mortgage is a loan that has a fixed interest rate for the duration of the loan. You can choose which term works for you, the number of years to pay off the loan, 10, 15, 20, 30. Most people choose a 30 year Fixed Rate loan meaning your payment will be the same for 30 years and will never change.
Most people choose a 30 year fixed loan in order to keep their payments low. The term is the length of time you have to pay back the loan. You will have a lower payment if you take 30 years to pay off the loan versus 15 years. It is important to first figure out what payment you feel comfortable with based on the income you are bringing home and then you can clearly see based on the options you have which program makes more financial sense. The beauty is that most loans in today’s market don’t have prepayment penalties and you can pay down your balance whenever you want. That is one of the main reasons people may choose a 30 year term, first to keep their payments low, and 2nd they can pay down their loan faster if they choose to. One VERY important note – ask your broker to go over how much interest you will pay and how much of your payment per month is just interest. You will see that a shorter loan period may have a larger monthly payment, but you will spend A LOT less money in total interest. It will be a bit shocking at first but will give you a much
Here is a special tip for readers of our blog – Did you know that if you make one extra payment per year and apply it to principal, not the interest you will knock at least 5 years off your loan? If you didn’t, now you do. I am always telling my clients that if they can, send just one extra payment toward the principal balance a year. They will save a significant amount of money and pay off their loan so much faster and won’t even feel it. Make sure if you pay extra to write a separate check to the bank and write your loan number of the check and “APPLY TO PRINCIPAL.” Lenders make a lot of mistakes so it is important to keep it very simple to avoid the payment being applied incorrectly. And make sure you check your statements regularly for properly assigned payments.
Call for a Free Rate Quote 818-565-6212 E: email@example.com\ Or fill in the attached form and I will get right back to you.