Fixed mortgage is one of the most popular and in demand mortgage scheme. It is a loan that has a steady interest rate, and monthly repayment that doesn’t change throughout the time period of the loan. The reason it is popular is because of its non-risky nature by having fixed rates, which suits a majority of people who dare not venture for other mortgage schemes that offer lower interest rates, but which can vary from time to time. Variation in interest rates and monthly payments are a huge risk factor no matter how pleasant the initiative may seem. In fixed mortgage however, 10 to 15 years down the lane, you are paying the same monthly amount, regardless of economical value.

There are a few common types of fixed rate mortgages which are the 15 – Year , 30 – Year , Biweekly, Convertible, Balloon loans and fixed rate interest only mortgage loan. Each of these will be briefly discussed.

15 and 30 Year Mortgage: In a 15 year fixed rate mortgage, people can easily get a home without any hassle of waiting for a long time, in contrast to the 30 year mortgage plan.

The only difference between the two is the rate of monthly payments. The 15 year repayment plan have higher fee as it provides with benefits in half the period. It eventually depends on the customer, how much monthly payments he can give for the next 15 years.The 30 year plan has always been the traditional time period for mortgage, but having such a long term mortgage is not a very pleasant experience as the interest keeps pending, therefore opt for short term period mortgage loan, and bring your monthly payments to the required limit.

Biweekly mortgage: Bi weekly mortgage helps people to repay the money twice a month, thus not becoming a huge collection at the end of the month. It is for an 18 to 19 year plan, and this mortgage mode decreases interest costs. The interest too is calculated every 14 days, hence it is considered as the optimal mortgage scheme for most people.

Convertible mortgages: A convertible mortgage allows a lender to convert the interest rate of the loan after a specific time period. This method also goes by the name of Reduction Option Loan (ROL), Reducing Interest Loan (RIL). The convertible mortgage is usually associated with the 30-year loan plan.

Balloon mortgage: This mortgage is a short term mortgage that have just a term of 5 or 7 year and the balance has to be paid in full since the balloon mortgage does not fully amortize.

Fixed rate interest only mortgage loan: This mortgage help borrowers to choose a particular interest rate for the entire time period of the loan. That is throughout the life of the loan, the interest rate will remain the same. This loan scheme is a newly brought out scheme but it is gaining popularity due to its flexibility in interest rates.

Now that you have the various types of mortgage available, depending on your financial status and needs, choose any which suits you best. But do not take any step without legal help, as in such cases legal counseling is extremely important.

 

 

Similar Posts:

Share