Remortgages Direct

Adjusted summary of articles by Ania Tates and Brian G Armstrong

If you are new to mortgages or just don’t remember going through the process the last time you financed a home purchase, this article will explain some important features of the loan known as the fixed rate loan or fixed rate mortgage. The fixed rate mortgage is by far the most common type of mortgage. Most fixed rate mortgages advertised also usually talk about the rate for a 30 year “fixed” rate.

fixed mortgage

A little less common are the adjustable rate mortgages. The longer the mortgage term, typically the lower the interest rate as the bank or financial institution that is extending the loan will typically make more money, at least via interest paid on the loan. One of the main advantages to the fixed rate mortgage is that the rate doesn’t change.

Some mortgage programs also have a bi-weekly payment option where you’ll pay your mortgage every two weeks. On a typical 30 year fixed rate mortgage, you’ll pay your monthly payment of which a percentage of that amount would go toward the principal and the other percentage goes towards interest.

30-year fixed
Pro- Low monthly payments
Offers flexibility, if you have more money you can pay it off in less than 30 years while keeping
the low monthly payment
Con – You pay thousands in extra interest

15-year fixed
Pro – Interest is 100% tax deductible
Con – Higher monthly payments

To exemplify the difference between a 30-year fixed mortgage and a sub-prime mortgage, let’s look at the following equation. On a 30-year fixed, $100k loan with 7% interest, your monthly payment including interest and principle would be $665. Since payments are lower with a 30-year mortgage, you can invest in a long-term fund that will pay out more than what you would save with a short-term loan.