A fixed-rate mortgage doesn’t have to be a confusing concept to grasp. Basically, a fixed-rate mortgage has the interest rate set the moment you take out the loan, and it will not change throughout the duration of you loan. Fixed-rate mortgages are the most common types of loans and are primarily given out in 15 or 30 year periods. The other kind of commonly received loan is an ARM, or adjustable rate mortgage. This type of loan changes with the rising and falling interest rates.

Below we will cover the basics of fixed-rate mortgages and answer a few basic questions about this kind of loan.

What is a fixed-rate mortgage?

A fixed-rate mortgage has a fixed interest rate that you set when you take out the loan. These types of loans are usually issued in 15 or 30 year payback periods as well.

How can I get a fixed-rate mortgage?

You can get a fixed-rate mortgage the same way you would get any other kind of loan, through your Arizona mortgage lender. Working with a qualified lender will help you decide which type of loan is best for your financial and lifestyle needs.

How does the re-payment process for a fixed-rate mortgage work?

The first payments are credited towards the interest, and once that’s paid off it’s directed towards the principle. So, in the first few years of your loan most of your payment will go towards paying off interest.

What kind of borrower do I have to be to get a fixed-rate?

Fixed-rate loans make sense if you need stability in your payments, and are looking for a simple loan to understand. However, if you’re looking for a loan with a lower down payment and more uncertain interest rates then an ARM might be best for you.

What are my options for paying off my loan faster?

The borrower can make a larger payment each month and the extra money will go towards paying off the principle, and will greatly reduce the amount of time you’re paying off your mortgage.

What are the benefits of a fixed-rate for the borrower?

A fixed-rate can be helpful because it allows you to make steady, consistent payments – which allows for consistent budgeting. Also, having a 30 year fixed-rate mortgage allows you to spend less on your monthly payments, which frees up income to put into other investments.

An advantage of a 15 year fixed-rate versus a 30 year fixed-rate is that the interest rates won’t be as high, and you’ll build equity much more quickly.

What are the disadvantages of a fixed-rate mortgage?

One disadvantage of a fixed-rate mortgage is that if you do want to refinance your home and try to lock in lower interest rates. You’ll have to go through the refinancing process, which can cost you a few thousand dollars in closing costs, as well as time spent digging up tax forms, bank statements and other needed documentation.

Sometimes a fixed-rate mortgage can be too expensive if you’re trying to sign a mortgage during a time when rates are high.

Who benefits the most, the lender, or the borrower?

Overall, a fixed-rate mortgage can end up benefiting the borrower more often than an adjustable rate mortgage. The fluctuations of interest rate can actually end up increasing the amount of money you’ll have to pay back in the long run.

We hope this information has been valuable and you have a deeper understanding of the mortgage process, and how a fixed-rate mortgage can benefit you. Taking out a mortgage doesn’t have to be a stressful process; simply taking the time to research and understand your options will help make your decision much easier.

If you have any questions about this or if you have any questions you’d like us to answer on our podcast, you can email your questions to team@azmortgagebrothers.com or give us a call at (602) 535-2171. Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.

•••

Thanks for listening and reading the Mortgage Brothers Show. Let us know if you have any questions you’d like us to answer on this podcast. You can email your questions to Tom@AZMortgageBrothers.com or Eddie@AZMortgageBrothers.com.

Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.

Signature Home Loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Signature Home Loans NMLS 1007154, NMLS #210917 and 1618695. Equal housing lender.

BACK TO LIST