Buying a home is an important milestone in your life, and one that costs a considerable amount of money. As you begin the home buying process and try to determine your best financing option, the interest rate you choose will significantly impact the amount of money you spend each month throughout the length of the loan. A fixed rate mortgage offers stability for a homebuyer because they can pay a consistent monthly payment and interest rate for a regulated period of time. If you are searching for a home in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, and are interested in learning more about how a fixed rate mortgage rate works, the loan specialists at Foundation Mortgage can help.
How Does a Fixed Rate Mortgage Work?
In fixed rate mortgages, interest rates remain the same throughout the entire loan period, therefore, your monthly mortgage payment and the amount of interest you pay will not change over time. Many borrowers prefer this type of loan because it offers security since they always will know what their future monthly payments will cost, in contrast to an adjustable rate loan, which has an interest rate that can reset and increase after a certain period of time. Fixed rate loans have a variety of different terms, and can span from anywhere between 5 to 30 years. Ultimately, the longer the term of your fixed rate loan, the lower your monthly payments will be.
The Advantages and Disadvantages of a Fixed Rate Loan
Obtaining a fixed rate mortgage can offer several benefits, making them very popular with homebuyers. Because the interest rate does not change or increase on this type of mortgage, a borrower is protected from any unexpected payment increases. Borrowers also have the option to choose a term that best meets their financial goals, since fixed rate mortgages offer a wide variety of flexible term options.
Although they offer advantages for many borrowers, fixed rate mortgages may not be the most beneficial option for some. First of all, a fixed rate mortgage will probably have a higher interest rate than other loans. The reason for this is because the cost guarantees the borrower will have the financial certainty of stable payments that won’t increase. Also, if you have a lower credit score, it can be challenging to qualify for a fixed rate mortgage. Another possible disadvantage to this type of loan is that if you wanted to take advantage of decreased housing market interest rates, you would have to refinance your mortgage, which can be a costly expenditure.
Deciding If a Fixed Rate Mortgage Is Right For You
If you are deciding on your mortgage rate options, and are located in the areas of Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, contact Foundation Mortgage today. We can work with you to understand if a fixed rate mortgage is the best financing option for your situation.
