There are several mortgage loans options available for a home purchase, each with its own advantages and requirements. One of the most popular types of mortgages for homebuyers is a fixed-rate loan.
Mortgage loans are available with two main types of interest rates: fixed or variable. A fixed-rate mortgage carries the same established rate throughout the life of the loan. Variable-rate loans, also called adjustable-rate mortgages (ARMs), combine an initial period of time where the rate is held constant, followed by a time of adjustment tied to market indices. These rates are typically set below market value for a period of time and then rise as time goes on.
There are several advantageous reasons for homeowners to choose a fixed-rate mortgage. Unlike with variable-rate loans, the rate does not change through the duration of the loan , making it easier to budget over the long term. Additionally, When market rates are low, it’s wise to select a fixed-rate loan as the risk of paying higher interest if the markets suddenly change is eliminated.
How Does a Fixed-Rate Loan Work?
The two main components of a fixed-rate loan are rate and term, also called the life of the loan. This is the amount of time over which principal and interest are repaid. A shorter loan term typically equates to a lower interest rate, and therefore less interest paid over time.
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Fixed-rate loans are one of the most popular mortgage solutions for homebuyers due to the consistency and predictability of the payments. If you are looking to take advantage of the several benefits that fixed-rate loans have to offer, our loan professionals at Spire Financial will guide you through the process to get you the mortgage you need for your home purchase. Chat with us today to see what kind of fixed-rate loan is right for you.