Fixed rate loans |
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With fixed rate mortgage (FRM) loan the interest rate and your mortgage
monthly payments remain fixed for the period of the loan. Fixed-rate
mortgages are available for 30 years, 20 years, 15 years and 10 years.
During the early amortization period, a large percentage of the monthly
payment is used for paying the interest. As the loan is paid down, more
of the monthly payment is applied to principal. The most popular mortgage term is 30 and 15 years. With the traditional 30-year fixed rate mortgage your monthly payments are lower than they would be on a shorter term loan. But if you can afford higher monthly payments a 15-year fixed-rate mortgage allows you to repay your loan twice as faster and save more than half the total interest costs of a 30-year loan. Besides, the shorter the term of a loan, the lower the interest rate you could get. With bi-weekly mortgage plan you pay half of the monthly mortgage payment every 2 weeks. It allows you to repay a loan much faster. For example, a 30 year loan can be paid off within 18 to 19 years. Balloon loans are short-term fixed rate loans which involve small monthly payments (usually as 30 year loans) for a certain period of time and one large payment for the entire amount of the outstanding principal. Usually they have terms of 3,5, and 7 years. Balloon loans with refinancing option allow borrowers to convert the mortgage at the end of the balloon period to a fixed rate loan -- based upon the outstanding principal balance -- if certain conditions are met. If you refinance the loan at maturity you need not be re-qualified, nor the property reapproved. The interest rate on the new loan is a current rate at the time of conversion. There might be a minimal processing fee to obtain the new loan. The most popular terms are 5/25 Balloon, and 7/23 Balloon. |