Fixed Rate Mortgage Questions and Answers
August 27, 2008
Should I Convert to a Fixed Rate Mortgage?
It is mentioned everyday in the newspaper, on TV, or around the water cooler at work: variable interest rates are making it difficult for home owners to afford to pay their mortgage. If you are in an adjustable rate mortgage (ARM), it may be time for you to convert to a fixed rate mortgage.
30 Year Fixed Rate Mortgage
The most common and well known fixed rate mortgage is 30 year fixed mortgage. This mortgage has a fixed interest rate for the entire 30 year term of the loan. This is the most conservative mortgage providing absolute rate stability but is most likely offered at higher rates than the variable ARMs. Along with the slightly higher interest, its payments include both principal and interest causing monthly payments to be higher than other available loan programs
30 Year Fixed Interest Only
If you want the stability of a fixed rate mortgage rather than the variable rate of an ARM, but need to minimize the monthly payment increase, the 30 year fixed interest only mortgage may be the program for you. This combines the conservative fixed rate mortgage with the interest only option allowing you lower monthly payments, while maintaining rate stability. The most common structure of this loan has a fixed interest rate for the full 30 year term while allowing you to make interest only payments for the first ten years.
Keep in mind that your lender will still want to have the entire balance of your loan paid off by the end of your 30 year mortgage term, so at some point, most likely in 10 years, your monthly payments will increase to include principal as well. Talk to your trusted lender to see if a conversion to a fixed rate mortgage is right for you.