There are many opportunities in Saint Louis to purchase an excellent home at a great value. Is a fixed-rate mortgage the right mortgage for you?
Fixed-rate mortgages are loans with a set interest rate that remains the same until the end of the loan. It is normally used in financing home purchases and is normally the first choice of people seeking a home mortgage.
The main advantage of a fixed-rate FHA mortgage is that the interest rate remains the same; homebuyers will not have to deal with any changes in mortgage payments when interest rates increase. Fixed-rate mortgages are simple loans with easily-manageable payment schedules. The key components of the loan are the principal of the loan and the interest paid to the lender who provides the loan. These are paid on a monthly basis.
A borrower will have an idea of the effect a loan will have on their monthly expenses once the monthly payment is calculated. Many of these loans allow borrowers to make additional payments in order to reduce the payment period. Some loan programs also allow lump-sum payments to end the loan early without prepayment fees.
Long-Term versus Short-Term Loans
Long-term loans have bigger interest payments while short-term loans have bigger monthly payments. Some non-traditional fixed rate mortgages allow borrowers to pay for the interest for a certain period before they start to pay for principal along with the remaining interest associated with the loan. These types of loans have become popular recently and they allow homeowners to acquire a high-priced home at moderately affordable payments at the start of the payment period.
Refinancing a Fixed-Rate Mortgage
While a fixed-rate mortgage will provide a borrower with a fixed monthly payment, the borrower will continue to pay at the same rate even if interest rates go down. Refinancing the loan can be done to pay the lower interest rate, but it may require additional expenses. Calculating the payback period allows borrowers to decide whether or not they should refinance their loan as they may end up paying more if their loan is refinanced.
Call Better Rate Mortgage at (314) 361-9979 today! We will help you decide which mortgage product is best for you to make homeownership a reality.