How to Get a Fixed-Rate Mortgage
What it is
| At a Glance | |
|---|---|
| Loan Type: | Mortgage |
| Lender: | Bank |
| Secured: | Yes |
With a fixed-rate mortgage, the interest rate on the loan stays the same for the term of the mortgage. The payments made by the borrower are the same each month. Conversely, adjustable-rate mortgages are intended to provide borrowers with comfort and peace of mind in the knowledge that their payments will not increase for the term of the loan. A fixed-rate mortgage is a good option when unpredictable interest rates make adjustable-rate loans more impractical and potentially expensive. Unfortunately the borrower does not benefit from any interest rate decreases.
Generally, fixed-rate mortgages offer the ability to repay principal or capital early without penalty. Early payments of part of the principal will reduce the total cost of the loan and will shorten the amount of time needed to pay off the loan. Fixed-rate mortgages also protect people from complex interest rate decisions. Often with adjustable-rate mortgages, also called ARMs, borrowers will have to make a decision to lock in on an interest rate.
Who it's for
Fixed-rate mortgages are for people who want to be able to take advantage of a low interest rate in the long term or who want the peace of mind of a constant interest rate for a period of time. A fixed-rate mortgage provides protection against sharp interest rate increases. Now, with low interest rates, fixed-rate mortgages are even more affordable. A lower rate means lower payments, which might help borrowers qualify for a larger loan.
What you need to do to apply
In order to obtain a fixed-rate mortgage, interested applicants will need to contact a local lending institution and inquire about the different options and rates available. Personal and financial history, including a credit report, will need to be made available to the lending institution. A property appraisal may also be required.