A fixed rate loan or mortgage is a loan that has an interest rate that stays the same throughout the life of the loan. That means it’s not going to increase or decrease so you will always know what to expect on the payment side.
Whenever you take a out a loan whether it be a fixed rate or variable rate, there will be interest. That is the amount you must pay back in addition to the loan itself. The interest included on a fixed rate loan is calculated into the payments so that when the term of the loan is over, you’ve paid back both in full. This may be the safer route since you know nothing can fluctuate, but that safety can sometimes come with a cost. These rates can sometimes be higher than a variable rate so you can pay more over the life of the loan for that certainty of a consistent payment.
Type of Fixed Rate Loans
Fixed rate loans are typically found in 30-year, 15-year, or 10-year mortgages. 30-year mortgages are by far the most popular option as they are the most affordable. For those with higher income, shorter terms may be the better option. A 15-year loan may have a higher monthly payment, but you will pay much less in interest over the life of the loan. You will also build equity much faster when choosing a shorter loan term. Fixed-rate loans are available with government backed loan programs such as FHA loans and VA loans as well as conventional loan options.
What if I Don’t Want a Fixed Rate Loan?
If you are researching options and want to know your other choices, you may look into a variable or adjustable interest rate loans. These types of loans don’t have a set interest rate which means your monthly payment will also vary over the course of the loan. The interest rate will fluctuate with the market so you may have a lower interest at the beginning of the loan but it can increase over time.
There is no way to know whether your interest will increase or decrease but if you are in a market where the interest does decrease, you can save some money over time as you pay back the loan.
It is important to discuss these options with your lender when you are choosing your type of loan to make sure whichever option you choose is best based on your finances and personal situation. If you would like to discuss these options with an expert at North Georgia Lending in Cumming, we would be happy to help and make sure you have all the information needed to make the best decision for you and your family.
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We know finances can be a very difficult and stressful topic to think about especially when it comes to purchasing a home and figuring out the best mortgage options but we are here to answer all those questions and address any concerns you may have. North Georgia Lending is located in Cumming, GA and we’d love to be on your team.