Fixed Rate Loan
Fixed Rate Loan
A fixed rate loan is a type of home or mortgage loan in which the interest rate on the fixed rate loan is the same for life of the loan, no matter how the market is doing. The biggest feature of a fixed rate loan is that the interest rate over the life of the fixed rate loan is known at the time the mortgage is originated. For example, if a potential home buyer takes out a home or mortgage loan and the interest rate is fixed at 10%, then the 10% interest rate stays the same over the life of the loan and the loan payments will never change.
A fixed rate loan has some advantages and disadvantages. Of course, the one main advantage of a fixed rate loan is that the payment and the interest rate will stay the same for the duration of the fixed rate loan. A fixed rate loan will not bring the potential homeowner any surprises with the fluctuation of the interest rate market. A fixed rate loan allows a potential home buyer to have stability and helps to make budgeting easier. A fixed rate loan is pretty easy to understand so that many potential first home buyers know what they will be getting into with a home or mortgage loan. One disadvantage of a fixed rate loan is that some fixed rate loans can be too expensive for some potential home buyers, meaning if they wanted take advantage of a fixed rate loan the homeowner would need to refinance and that may cost the homeowner a few thousand dollars in closing costs. A fixed rate loan will also not allow for interest rate breaks or early-on payments. When a potential home buyer is thinking about whether or not a fixed rate loan is right for them, the potential home buyer should contact a home or mortgage real estate specialist to get the help in finding out what their options may be with a fixed rate loan.