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The Mortgage Bankers Association (MBA) recently made a preemptive strike against what it obviously perceives as the next threat against the mortgage industry - "suitability standards." Read more...

 

Fixed rate mortgage information

One of the more common types of mortgage loans is the fixed mortgage rate. If anyone has researched mortgages or even taken one out, probably knows the ins and outs of mortgage shopping are probably familiar with a fixed rate mortgage the fixed rate mortgage is popular because there are no surprises when it comes to interest rates. Fixed rate mortgages present predictable housing costs for the life of the loan. Some fixed rate mortgage plans include the 30 year fixed rate mortgage, the 15 year fixed rate, or a convertible mortgage. The fixed rate mortgage used to mean something different in the past than it does now. Before, the 30 year fixed rate mortgage was the only choice when it came to mortgages. No it is just one choice among the wide selection of home loans an loan terms. While it may not be the only option anymore, the 30-year fixed rate mortgage may still be the best mortgage for many circumstances. It offers the lowest monthly payments of fixed-rate loans, while remaining constant throughout the life of the home loan. The only catch is that the loan terms are generally longer, since the monthly payments are so low. Some lenders offer 25, 30, and even 40-year term mortgages as well. One thing to remember with longer loan terms is that more interest will be paid over time.

Depending on how intent a buyer is on owning a home, they might look into any of the loan terms. The 15-year fixed-rate mortgage allows homeowners to own their homes in half the time and for less than half the total interest costs of the traditional 30-year loan. The shorter home loan term, however, is reciprocated by the 10 percent to 15 percent higher monthly payments. Some homebuyers prefer this type of mortgage because it allows them to own their home quicker, allowing room for other financial decisions in the future. Others prefer it because they will own their home free and clear before retirement and probable declines in income.

The major disadvantages or the 15-year fixed rate mortgage are the higher monthly payments. However, this shorter term fixed rate loan is suggested if someone is able to maintain the payments. The bi-weekly mortgage shortens the loan term to 18 to 19 years by requiring a payment for half the monthly amount every two weeks. The bi-weekly payments increase the annual amount paid by about 8 percent and in effect pay 13 monthly payments (26 bi-weekly payments) per year. An appealing aspect of this loan, however, is that the shortened loan term decreases the total interest costs substantially. The interest costs for the bi-weekly mortgage can be decreased even further, however, by paying some of the principal and because the interest is calculated every two weeks. By paying bits of the principal faster, the homeowner saves additional interest. A person's ability to qualify for this type of home loan is based on a 30-year term, and most lenders who offer this mortgage will allow the homebuyer to convert to a more traditional 30-year loan without penalty. Availability is limited on this mortgage, but it can be worth looking for if someone has the means of paying more on a mortgage each month.

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