All mortgages can be divided into two main conventional and government loans. Additionally, each of the various mortgage programs can further be classified as fixed rate loans, adjustable rate loans, or a combination of the two. Fixed Rate Mortgages With fixed rate mortgage (FRM) loans, the interest rate and monthly payments remain fixed for the period of the loan. Fixed-rate mortgages are available for 40, 30, 25, 20, 15, and 10 years. Generally, the shorter the term of a loan, the lower the interest rate. The most popular mortgage terms are 30 and 15 years. With the traditional 30-year fixed rate mortgage, monthly payments are lower than they would be on a shorter term loan. But if a borrower can afford higher monthly payments, a 15-year fixed-rate mortgage allows repayment twice as fast and saves more than half the total interest costs of a 30-year loan. The payments on fixed rate fully amortizing loans are calculated so that at the end of the term the mortgage loan is paid in full....
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