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what is a Fixed Rate Mortgage

May 10, 2008
It is quite normal for potential home buyers to look into 30 year or 15 year fixed mortgage rates when considering their monthly repayments. No-one wants a mortgage hanging around their neck forever but with home buyers entering the market later, an early repayment of this loan is important. Although before signing any documents, there are many things to consider. It is important to make sure that the interest rate doesn't change over the course of the loan.

Steer clear of lenders that are offering unbelievable deals because they probably are. Loans agreed with a 15 year fixed mortgage keep the same interest rate throughout the entire life of the agreement. For many people with regular incomes, this is a definite benefit as there are no hidden charges. My wife and I had already decided to research long term fixed mortgage rates when we started looking at homes for sale.

Even though it was important for us to pay off our loan at the earliest possible opportunity, we didn't want high, unrealistic monthly payments which we would have trouble maintaining. It became obvious that we had to look at fixed rate mortgages over a longer period and not just 15 year plans. The problem was that we weren't very happy about having a mortgage close to when we both retired so it was our hope a 15 year fixed mortgage rate would still be available to us. It wasn't easy for us because of the stress to pay the house off early.

After taking everything into consideration we decided on a 30 year loan instead. Many factors were taken into account when reaching this decision. The most important point was the fact I discovered my wife was having a baby. My wife decided she wanted to raise our child at home so I couldn't be certain of her monthly financial commitment to our household expenses. The financial commitment per month on the 15 year fixed mortgage rate was just too high. We just decided we would probably get into trouble if we took this route. The monthly payments on a 30 year loan were quite a bit lower.

We are also able to make extra payments throughout the year to make the principal shrink quicker. Those few extra payments also help reduce the number of years you have to pay the loan over.

This takes some discipline but it is well worth the effort it in the long term. Taking our needs and abilities into account was more important than our desire for a shorter term mortgage plan. In retrospect, everything worked out ok for us by going down this road.
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