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Fixed rate mortgage loans
are the
most common loan type and is very popular when interest rates are low.
Fixed rate mortgage loans are especially sensible when interest rates
are low. The loan is repaid over a fixed term with monthly payments of
principal and interest. The term can be 10, 15, 20 or the ever popular
30 year term. The same percentage interest is charged over the life of
the loan. The caveat to this type of loan is that you will probably not
build up appreciable equity for the first several years of the loan few
years of the loan as the interest in front loaded.
Fixed rate mortgage loans may be a better option if you plan to stay in
your home for some time. The big advantage of fixed rate mortgage
loans, is that you can plan your finances, as you know that for the
next few years the same amount will be paid to the mortgage.
You should also remember that it is probable your income will rise over
the years and the mortgage amount will seem less burdensome as it
remains the same.
The disadvantages of fixed rate mortgage loans are that when interest
rates are high the monthly payment is high and will be high over the
term of the loan unless you refinance when rates are lower. Also when
interest rates are high you may not qualify for a fixed rate loan for
the amount you need, as the monthly payment may be too much for you to
afford. If you decide to refinance on the loan later you may be
required to pay an origination fee and point's refinanced need to be
deducted from taxes over a 20 year period, not the year of the
refinance.
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