When you’re shopping for a new home, getting the right mortgage is one of the most important factors in your buying power. You have many options, each with its advantages and disadvantages. Which ones you are eligible for depends on your income, credit, and other personal factors. A fixed-rate mortgage is one of the most common types of home loans.
What Is a Fixed Rate Mortgage?
A fixed-rate mortgage is one with a rate that does not change over time, no matter the length of the loan. This type of mortgage is the right choice if you can lock in a rate with which you are satisfied.
Most fixed-rate mortgages have 15 or 30-year terms, meaning you have that long to pay off the balance via monthly payments. A 15-year fixed-rate loan requires higher payments than a 30-year, but you pay less in interest. Making extra payments can help you pay off your mortgage faster, but be sure your contract has no prepayment penalties.
What Are the Advantages of a Fixed Rate Mortgage?
The main advantage of a fixed-rate mortgage is stability. With an adjustable-rate loan, the amount of the monthly payment changes according to the market.
The varying amounts make it difficult to budget, and when the rates go up, the higher payments may be more difficult to pay. Also, most fixed-rate mortgages have no prepayment penalties, so you can make larger payments when you have money available.
What Are the Different Types of Fixed Rate Mortgages?
Three types of fixed-rate mortgages are available.
- 5-year fixed-rate mortgages: The name is slightly misleading since your rate is only set for five years. After the five years is over, the rate becomes adjustable and changes based on the market. If you are planning to stay in the home for five years or less, this kind of short-term fixed-rate can save you money.
- 15-year fixed-rate mortgages: If you can make a larger payment, this may be the right choice for you. Monthly payments will be higher, but you will pay less in interest over the years.
- 30-year fixed-rate mortgages: A loan of this length gives you the lowest payments. If you plan to stay in the home for many years, the stability of a 30-year fixed rate may be appealing.
Why Choose FMS Bank?
FMS Bank should be your first choice for a fixed-rate mortgage loan in Colorado. We pride ourselves on making the mortgage experience a positive and convenient one. You can begin the process online, and FMS offers extensive educational resources to help you as you start the journey to homeownership.
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