Getting a fixed-rate mortgage can help you get a mortgage with lower interest rates and more protection against interest rate fluctuations, potentially cheaper monthly payments. You may be wondering what a fixed-rate mortgage is and how a fixed-rate mortgage works? But with the help of a Florida mortgage company, the process will get more accessible, and it would be easy for you to get a fixed-rate mortgage. Also, here we'll explain in detail about fixed-rate mortgages. So let's move on!
What Is A Fixed-Rate Mortgage?
A fixed-rate mortgage is a mortgage with an interest rate that does not change for the life of the loan. When you get a fixed-rate mortgage, you agree to pay both the interest and principal on your loan in set monthly installments, known as amortization. There are two types of fixed-rate mortgages: a 30-year fixed-rate mortgage and a 15-year fixed-rate mortgage.
30-year Fixed-rate Mortgage
The most popular choice among borrowers is the 30-year fixed-rate mortgage. This type of fixed-rate mortgage allows you to stay at the same interest rate for 30 years. Here's an example: If you get a $200,000 fixed-rate mortgage with a rate of 5%, you can expect to pay a monthly payment of about $1,077.50. However, if you choose to pay your mortgage over 30 years, your total interest paid will be approximately $166,608.
15-year Fixed-rate Mortgage
15-year fixed-rate mortgages typically have lower interest rates than 30-year fixed-rate mortgages. If you choose a 15-year fixed-rate mortgage, you will make the same monthly payments as a 30-year fixed-rate mortgage. However, because you pay off the loan in 15 years, your total interest is significantly less than a 30-year fixed-rate mortgage. Here's an example: If you get a $200,000 fixed-rate mortgage with a rate of 5%, you can expect to pay a monthly payment of about $1,287.25. If you choose to pay your mortgage over 15 years, your total interest paid will be approximately $79,945.
How Does a Fixed-Rate Mortgage Work?
A fixed-rate mortgage is a type of Florida mortgage loan that charges you the same interest rate throughout the entire time you make your monthly payments. This can help keep your monthly payment amount steady, giving you protection against the changing interest rates and uncertain financial conditions in the future.
What Are Advantages and Disadvantages Of A Fixed-Rate Mortgage?
- Fixed-rate mortgages can protect against interest rate fluctuations.
- Fixed-rate mortgages allow you to keep your monthly payment the same for a specified amount of time, which can help you stay on budget.
- A fixed-rate mortgage offers you a lower interest rate than an adjustable-rate mortgage.
- You can't make extra payments on a fixed-rate mortgage.
- If you choose a 15-year fixed-rate mortgage and keep it for longer than 15 years, the interest rate might be higher than you could get with a 30-year fixed-rate mortgage.
Who Should Get a Fixed-Rate Mortgage?
A fixed-rate mortgage can be a good choice for homebuyers who want stability and lower monthly payments because the interest rate will remain the same throughout the entire time you make your monthly payments. But, you should also consider getting a fixed-rate mortgage if:
You plan to stay in your home for a long time: The longer you plan to stay in your home, the more likely your interest rate will be lower with a fixed-rate mortgage than with an adjustable-rate mortgage.
You want to build equity faster: With a fixed-rate mortgage, you'll pay less interest over time because you won't have any interest rate changes as with an adjustable-rate mortgage.
You want to pay off your home loan sooner: A fixed-rate 15-year mortgage will shorten the number of years you have a mortgage, which means you'll build equity faster and have lower overall interest costs.
You want to lock in an interest rate: If you think your income, employment, or credit situation could change in the future and you would have difficulty being approved for a higher interest rate, then a fixed-rate mortgage might be the right choice for you.
How Do I Apply for a Fixed-Rate Mortgage?
You can get a fixed-rate mortgage through your bank or credit union, which you can find in the phone book. When applying for a fixed-rate mortgage, you will have to provide documents that show information about your income, employment history, and debt. You will also have to undergo a credit check.
The Bottom Line
A fixed-rate mortgage lets you pay the same interest rate for a specific time. This can be beneficial if you want to keep your monthly payment steady or think interest rates are likely to increase in the future. You should consider getting a fixed-rate mortgage from a Florida mortgage company if you plan to stay in your home for a long time, want to build equity faster, like only one monthly payment, or lock-in an interest rate.