A fixed-rate mortgage (FRM) is the most common and easy to understand mortgage program available to homeowners. With an FRM, the interest rate is set for the full length of the loan and doesn’t change. Since monthly mortgage payments for principal and interest stay the same for the life of the loan, it’s easier to plan a budget using this sort of loan.
An FRM can be a conventional loan or a government-insured loan (FHA, VA etc.). Typically, a conventional FRM is harder to qualify for than a government-insured FRM and requires a slightly higher down payment (~5%). However, in some cases the interest rates can be lower and have lower closing costs for a conventional FRM. Also, monthly mortgage insurance is usually less or can be nothing with 20% down payment.
Furthermore, an FRM can be a conforming loan or a non-conforming loan depending on the amount borrowed.
An FRM may be preferable if….
- You plan to stay in your home for seven years or longer
- You prefer to accurately predict the amount you will have to pay each month for your home loan – thus enabling you to determine your budget with accuracy
- Current interest is widely believed be at or near bottom
- You believe inflation will rise above average during the life of your mortgage
- You can afford to pay a little higher interest rate compared to interest rates on ARM in exchange for getting a fixed interest rate for the entire term of your mortgage
- You are not planning to sell or refinance your home in the foreseeable future
Depending on your personal situation, a fixed-rate mortgage may or may not be right for you. Contact me to help you find the best mortgage solution for your situation at the most competitive rates. As an independent mortgage broker, I represent you, and not any specific bank or mortgage lender, so I have greater freedom to find you the best mortgage for your needs at the most competitive rates.