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    Home Purchase - Home Refinance
    Serving MN WI IA ND SD

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  • What is a fixed rate mortgage?

    As the name implies, the monthly payment on the loan stays exactly the same for the entire length of the mortgage loan.  On a standard 30-year fixed rate mortgage, if the loan art of your monthly payment is $1,000 a month on payment one, it is still $1,000 a month on the last payment.  It never changes.

    The other loan option is an ARM, or adjustable rate mortgage. Read about adjustable rate mortgage here.

    Your Monthly Payment Can Still Change

    Wait what, you just said the payment doesn't change?

    Well, this is only partially true, depending on the person.  Most home mortgage loan payments also include property taxes, homeowners insurance, and maybe even private mortgage insurance with their monthly payment. These are known as escrows.

    The property taxes, and homeowners insurance can change, therefore effecting your monthly payment, but the loan itself part of the payment will never change.

    Some homeowners, primarily those who put at least 20% down have the option on not including taxes and insurance in their monthly payment, so truly, their payment never ever changes.

    Most Popular Mortgage Loan

    The fixed rate mortgage is the most popular type of mortgage loan because it offers stability and predictability over the entire length of the loan. The most popular term, also known as the length of the loan, or amortization period, is 30-years, because it gives you the lowest possible monthly payment.  Other popular amortization terms are 35-years, 20-years, 15-years, and just 10-years, but technically you can do anything in between 10-years and 30-years, say a 26.5-year loan for example.

    Longer Term = More Interest Paid

    The longer the term, the smaller the payment.  Sounds good right?  Well, not so fast.  The longer the term, the more interest you'll pay over time.  The mortgage industry calls this TIP, or total interest paid.

    With shorter term loans, your monthly payment will be higher, but you can save a lot of interest this way.  Even just going from a 30-year to a 25-year saves a lot of month.

    BE sure to speak with a Cambria Mortgage Expert Loan officer and ask what the payment differences will be for the various amortizations periods.

    One other thing... The shorter the loan period, the lower the interest rate.  It isn't uncommon to see a 15-year loan easily be 1/2 percent to 3/4 percent lower interest rate than a 30-year fixed.

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