Fixed Mortgage
A fixed mortgage is not one that was broken. The term “fixed mortgage” is short for “fixed rate mortgage” and the fixed rate is not broken, either. It is fixed in the sense that the interest rate of a fixed rate mortgage loan does not change; it remains the same over the entire life of the loan. Most people prefer fixed rate mortgages because they are simple and predictable.
With fixed mortgage rates, the amount of your monthly payment will not change. Hopefully, your income will increase over time so your mortgage payment will consume a decreasing percentage of your monthly income. Due to inflation, the real value of your mortgage payment will also decline over time, so you will be giving up less value in return for a place to live.
Of course, the current fixed mortgage rate takes inflation into consideration, so it tends to be higher than adjustable mortgage rates. The latter give you a lower, tempting rate right now and then rise later when you’re good and hooked.
The best fixed mortgage rate is the lowest one, all else being equal. But of course, all else is never equal in nature. A low fixed mortgage rate can be had with excellent credit from a highly motivated lender. It can be lowered even more by lowering the risk that the lender takes. That risk is a function of how long he has his money lent to you.
A 15 year fixed mortgage will have a lower interest rate than a 30 year fixed mortgage. Of course, you will have to make much larger monthly payments to repay the loan in half the time. But over the life of the mortgage you will pay far less in interest with a 15 year fixed mortgage than with a 30 year fixed mortgage.
Shop around extensively to find the best fixed mortgage rates and lending terms. Some lenders do not want to make “short” 15 year fixed rate mortgages; they want the loads of additional interest that accrues on a nice, long 30 year fixed rate mortgage. So if the first bank you try won’t give you the fixed rate mortgage you want, go to another.
A fixed rate mortgage is simple to compare to other fixed rate mortgages. It lends a certain stability to one’s financial planning. It’s somehow associated with prudence, intelligence, and dependability; a fixed rate mortgage tells the world that you are able and willing to spend more than you have to in order to obtain security and predictability.