What are Fixed-Rate mortgages? A fixed rate interest mortgage has the same interest rate for the whole tenure of the loan. When one refinances into a fixed rate mortgage, there is a general peace of mind that the monthly payments will be fixed for the whole loan term (excluding the variations in the property tax). The loan terms are usually between 15, 20 and 30 years. There are a few variations in a fixed-rate mortgage:
Biweekly mortgage – a biweekly mortgage allows the borrower to make payments in every two weeks. This obviously leads to accumulate equity much faster.
Balloon mortgage – in this type of mortgage, a low rate of interest is provided for short term financing (generally seven years). At the end of this tenure, you have to either look for refinancing or pay a lump sum amount of the loan. Balloon loans are however not very common. If you are a homeowner who is looking for a really effective mortgage, InterestFirst Mortgage is perhaps the best solution. This plan offers the benefit of a low and fixed-rate monthly payment. For the first 15 years of the loan, you have to pay only the interest and escrow payments of the taxes and insurance, every month. The payment adjusts at the beginning of the 16th year to cover the principal, remaining interest and escrow payments (if necessary) due to the loan for the next 15 years.
What are adjustable rate mortgages? Adjustable rate mortgages or ARMs are also common amongst the users. In this plan, the consumer is allowed to refinance according to his choice – when the interest rates are high or when he wants to trade in a higher fixed-rate mortgage for a lower rate ARM. Though the loans terms differ from one lender to another, usually adjustable rate mortgages offers rate adjustment terms anything between one to ten years.