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Fixed-rate mortgages have been the bread-and-butter of the home loan industry for decades. These mortgages provide financing terms that are easy for most consumers to understand. Unlike mortgages with a variable rate, you'll always know the exact amount of your monthly payment and your interest rate. The rate that you borrow at will be locked, making this type of mortgage an ideal choice for individuals on fixed incomes and those who don't want to worry about their monthly payment amount changing all the time. Understanding Fixed-Rate Mortgages When you take out a fixed-rate mortgage, you are agreeing to borrow a set amount of money at a set interest rate. This means that your monthly payments won't change unless you decide to refinance your home. It's important to understand that your payments won't be set in stone until you've completed escrow and your tax and insurance assessments have gone through. Once you've complete these steps, though, you'll know how much you'll be paying for the next 15 to 30 years. The Advantages of a Fixed-Rate Mortgage Homeowners choose fixed-rate mortgages for many reasons. These products do offer many benefits, especially for those who are buying a first home. Remember that this type of mortgage provides: ? > A fixed interest rate and fixed payments for the life of the mortgage. ? > Stability and the ability to budget because payments never change. ? > Straightforward terms that most borrowers can understand without fuss. Understanding Fixed-Rate Mortgage Payments When you take out a fixed-rate mortgage, you'll have some control over your payment options. First and foremost, you'll be able to control monthly costs by taking out a loan that meets your budget. Second, you'll be able to shop around and compare terms so that you can find the best financing possible for your home. Keep these payment options in mind as you work with your mortgage broker. 30-Year vs. 15-Year Mortgages The majority of fixed-rate mortgages are issued in 15- or 30-year terms. If you choose a 15-year mortgage, you'll be required to pay off the total loan amount, plus interest, in that many years. Choosing a 15-year mortgage means higher monthly payments than a 30-year mortgage. However, 15-year fixed-rate mortgages generally offer a lower interest rate, or APR, than 30-year mortgages. It's important to look at how much you'll be paying in interest over the life of the loan before you decide what terms are best for you. Prepayment and Early Payment Options Perhaps you'd like to take out a lower-interest 15-year mortgage, but you just can't afford the higher monthly payments. To pay your loan off faster, you can send a little extra money with every payment. Over time, these extra payments will add up and you may be able to pay off your mortgage much sooner than expected. Accelerated Payment Options Some lenders offer an accelerated payment plan where you pay your mortgage bill bi-weekly instead of monthly. While you still pay the same overall monthly amount, you may be able to reduce interest charges. Ask your lender about accelerated payment options if you want to reduce the amount of time it takes to pay back your loan. Steve Peterson Steve Peterson is the Branch Manager for the Lake Tahoe office of Sierra Pacific Mortgage. With more than 20 years of lending experience, he began specializing in helping clients in the Lake Tahoe and Truckee areas finance their home purchases in 1992. Steve is adept at the unique challenges of lending in resort markets. With an MBA in finance, he can understand the complexities of high income borrowers, the challenging guidelines for resort condos and second homes. He brings a unique knowledge of the Lake Tahoe area which is critical in today’s challenging mortgage market. To get more useful articles or to learn more about Steve and his team, go to their ">www.financingtahoe.com"> website or contact Steve directly at 888-232-7687 (wk), or 775-219-7151 (cell), or by sending him an email at steve@financingtahoe.com.
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