There are many kinds of mortgages that are offered by lending companies in the market today. One of the most common among them is fixed interest mortgage. By definition, fixed interest rate mortgage loans have fixed rates and their monthly payments generally are fifteen year and thirty year periods.
Fixed rate mortgages are well known in the consumer based market if only because of stability. Consumers are actually quite hesitant to apply for house loans because of the fluctuation of rates in the market. Fixed interest mortgage loans are very affordable for everyone, especially if rates are low.
A borrower of fixed interest rate mortgage is faced with the task of choosing between fifteen year fixed-rate or thirty year fixed rate mortgage. Some prefer the former obviously because of the short length of term. On the other hand, many select the 30 year if only because of the low monthly payments.
Each type has its advantages as well as disadvantages.
30-year Fixed Interest Mortgage – Advantages and Disadvantages
A 30-year fixed mortgage offers clients the chance to borrow on long term basis. They enjoy this privilege without any worries on the changes in the interest rates or even the payments on such. And because the thirty year fixed rate mortgage’s amortization is of a longer period, it is a given that that payments very month is low compared that those of the 15 year loan.
However, this can be a disadvantage for the borrowers as the overall bill for interest is higher precisely because of the length of the amortization period. Likewise, since payments for 30-day fixed interest rate mortgage are usually utilized to pay interest instead of the principal, borrowers will build equity at a much slower pace.
The high interests of 30-day loans do not stop borrowers from getting one. One reason is that the high interest bill increases the deductible amount come tax time. This can reduce or even totally take away their liability on federal income tax.
15-year Fixed Interest Rate Mortgage – Its Advantages as well as Disadvantages
One significant advantage that attracts consumers into getting a 15-year fixed loan is the fact that periods of amortization are shorter, which means the building up of equity is at a quicker pace. Likewise, with a fifteen yr fixed rate mortgage, the interest bill is low overall. Rates of 15-year loans are much lower than that of the 30-year.
The disadvantages, on the other hand, include high monthly payments. Such setback of owning a 15-year fixed type might just restrict consumers to small properties and houses.
There are yet many other factors for consideration when selecting the type of fixed interest mortgage. Be aware that once can actually make prepayments, which can help the principal amount be reduced significantly every month. This way the loan might be paid off much earlier than the contracted term.
Image credit: Mr. Kimberly
