What you need to know about Fixed Rate Mortgage
by admin on 22/03/09 at 6:56 am
If you approach a mortgage broker for getting a mortgage for your home, he will suggest two types of mortgage rates.
a) Fixed Mortgage Rate or FRM
b) Adjustable Mortgage Rate or ARM
It is important that you look at all options before you decide on which option to choose. In a Fixed Rate Mortgage the rates of interest are fixed throughout the tenure of the mortgage. You need not worry if inflation rises and the lenders raise the interest rates. The tenure of Fixed Rate Mortgages is anywhere between six months and thirty years. Borrowers usually take mortgages which have longer tenures because they find payment of dues much easier. If you are buying a property for the first time I suggest you opt for Fixed Rate Mortgage as it involves less risk and is more stable. You need not worry about changes in interest rates and how these changes will affect your monthly payments. You just need to set aside a specified sum of money each month to pay your dues. Borrowers opting for fixed mortgage rates need to pay a higher rate of interest when compared to interest paid under Adjustable Mortgage rate, because they are protected against the risk of changing interest rates. For added protection against uncertainty, I suggest you take out home insurance on your property.
