While there are many different types of home loans that homebuyers can choose from these days, the vast majority still choose traditional fixed rate mortgages. Most homebuyers opt for fixed mortgage interest rates because the rate stays the same for the life of the loan, so there are no surprises. People can rest assured knowing that the payment on a fixed rate loan will not fluctuate like an adjustable rate mortgage would. The fact that payments remain constant also helps homebuyers plan their monthly budgets for the 10, 15, 20 or 30 year terms.
With a fixed rate mortgage, the principle and monthly interest payments do not change throughout the duration of the loan, unless the homeowner took out a fixed rate mortgage with an interest only feature that was going to reset after a set period of time. As long as the borrower remains in a fixed rate loan agreement, the interest rates cannot change according to the terms of the note. Thus, homebuyers can enjoy the financial security of the fixed mortgage interest rate, keep track of the exact amount of their payments, and manage their personal budget more easily.
When mortgage interest rates are in a rising rate market, it is especially beneficial to have a fixed rate mortgage. This is because the fixed rate loan actually “fixes” the current rate before they get any higher, so borrowers don’t need to worry about those frightening future rate hikes. The amount of the monthly payment can be dependant on the buyer’s credit worthiness and the loan’s repayment terms, which may be between 10 and 40 years, typically.
For these and numerous other reasons, the fixed mortgage interest rate is still appealing after all these years, and now buyers can choose from more varied repayment periods depending on their personal situations. This lending option protects borrowers from any upward fluctuations in mortgage interest rates, which is a good thing indeed.