What is a Fixed-Rate Mortgage?

This article will help you to know what it means and how you can get a fixed-rate mortgage.
<a href='https://rosegate.com/author/cameronodom/'>Cameron Odom</a>
Cameron Odom
September 12, 2022
3 min read

When securing loans and mortgages come into the mix, many know getting a home is challenging. But then, it can become easier when you know what type of mortgage to opt for. If you are a home buyer and have come across a fixed-rate mortgage, don’t be dismayed. This article will help you to know what it means and how you can get a fixed-rate mortgage. Read till the end to know how to get a fixed-rate mortgage and all you need to consider before opting for one.

What is a Fixed-Rate Mortgage?

A fixed-rate mortgage is the most familiar mortgage type in the United States. The name is self-explanatory. It is a type of mortgage with a stable interest rate. This loan type has a consistent interest rate throughout the entire duration of the loan. Your interest and the principal remain the same every month. Even market fluctuations and changes do not affect this mortgage’s rate.

How Does a Fixed-Rate Mortgage Work?

The dynamics are simple. Imagine you make a 24% deposit on a home. And the home has a purchase price of $340,000. If your loan is accompanied by a fixed-rate mortgage of 30 years at 3.42% interest, you’d have to make a $1,475.16 payment each month. And this pay would be consistent for the next 30 years. Of course, this excludes insurance and tax.

Should You Get a Fixed-Rate Mortgage?

You can choose this mortgage type because of:

  • Stable Loan Rates

The interest rates to work with are more stable than other adjustable loans. The exact rate you lock in while getting the loan is the way it stays throughout the loan tenure.

  • Predictable Budgets on Mortgage

As a result of the fixed rates, you know exactly what to budget and pay on your mortgage every time. This helps to keep your financial health stable. You do not need to worry about fluctuating expenses and rates arising from making good on your mortgage.

Cons of getting a fixed rate mortgage include:

  • Higher Rates

Compared to other adjustable loans, the fixed-rate mortgage has a higher rate. For example, your monthly payments on fixed-rate loans are considerably more than that of ARM mortgages.

  • No Benefits from Fallen Rates

In the same way that the rise in market rates does not affect you, lower rates also do not. And in this case, that does not work in your favor. Seeing that you would not get to enjoy the lower rate at that time.

  • Stricter Eligibility

Qualification for this type of mortgage requires a more stringent process. That is, you must have crossed your ‘T’s and dotted your ‘I’s on your financial records. You also have to understand the DTI ratio as well as the basic credit score that would ascertain your eligibility to borrow.
In conclusion, the fixed rate mortgage is the most popular in the US for a reason. It puts your mind at rest with the rate stability. As a home buyer, you could leverage this to get that home of your dreams.

You might also like
July 29, 2024

Demystifying Treasury Yield: Expert Advice from a Rosegate Mortgage Professional

Are you considering diving into the mortgage market? Understanding the intricate dynamics of interest rates is crucial for making informed decisions. One crucial factor that often influences mortgage rates is treasury yield. In this comprehensive guide, we’ll unravel the mystery behind treasury yield and delve into its profound implications on the mortgage process, with professional […]

5 min read
October 5, 2023

Unlocking the Power of Home Equity: A Comprehensive Guide

Homeownership is a significant milestone in life, and it comes with a hidden treasure - home equity. Understanding how to make the most of your home's equity can open up a world of financial opportunities. In this comprehensive guide, we'll explore the concept of home equity, its benefits, and various strategies to leverage it for your financial well-being.

3 min read
September 6, 2023

Maximizing Financial Potential: The Benefits of a Cash-Out Refinance Mortgage

At Rosegate Mortgage, we understand that homeownership is not just about finding the perfect house; it’s about making your home work for you. A cash-out refinance mortgage can be a powerful financial tool, allowing you to leverage your home’s equity for various purposes. In this blog post, we’ll explore the numerous benefits of choosing a […]

3 min read