Conventional Fixed Rate Mortgages
Choosing a Conventional Fixed Rate Mortgage or Loans
A Conventional fixed rate mortgage or Loan generally comes with one of three options; the 30-Year Fixed Rate Mortgage, 20-Year Fixed Rate Mortgage and the 15-Year Fixed Rate Mortgage. If a borrower is planning on being in the same home or condo for a long period of time, a 30-Year Fixed Rate Mortgage may be more attractive because it offers stability. The monthly payment will remain consistent over the life of the loan. If interest rates are at historic lows at the time the borrower is seeking to purchase or refinance, this is a good program to consider.
A 15-Year Fixed Rate Mortgage or loan program offers the same stability, but the accelerated amortization schedule makes the monthly payment substantially higher. While the interest rate may be lower on this type of loan or mortgage, the borrower must be willing to commit to a higher monthly payment. If the borrower wishes to retire in 15 years and be debt-free at that time, this loan or mortgage program may be more suitable to the borrower's long-term needs.
It is also possible to make pre-payments on a 30-Year conventional loan or mortgage and reduce the life of the loan or mortgage, as well as the overall interest payment, without committing to the higher monthly payment of a 15-Year program. As long as there is no pre-payment penalty associated with the 30-Year loan mortgage, pre-payment offers the borrower the latitude to make additional payments when it is affordable. If cash flow becomes difficult, this arrangement will not put the borrower in a compromising position.