A fixed-rate mortgage (FRM) offers one of many financing options for homebuyers. It enables homebuyers to lock in an interest rate on a home loan and pay a set amount each month for the life of a mortgage. As such, an FRM remains a popular option for homebuyers across the United States.
Ultimately, there are many benefits to choosing an FRM, including:
1. Easy Budgeting
With an FRM, your mortgage payments will always stay the same. Thus, after you get approved for an FRM, you can budget accordingly.
An FRM often serves as a great option for homeowners who struggle to maintain a budget. It ensures your mortgage payments will never rise or fall for the life of your loan, which may make it easier for you to map out a weekly, monthly or annual budget.
In addition, an FRM will stay intact regardless of market conditions. This means you won't have to worry about your mortgage costs rising even if interest rates increase nationally.
2. No Price Fluctuations
An FRM minimizes headaches for homebuyers, and for good reason. After you agree to FRM terms with your lender, you will know precisely what you'll be paying for your home.
Comparatively, an adjustable-rate mortgage (ARM) may be difficult for homebuyers to understand. This type of mortgage may fluctuate over time, which means the amount you pay in the first few years of your loan could escalate.
For example, a 5/1 ARM ensures that your interest rate will remain intact for the first five years of your loan. After the initial period, the interest rate may change annually. As a result, your monthly mortgage payments may fluctuate over the life of your loan.
3. Simple to Understand
Your lender will be able to outline the terms of an FRM with ease, as this type of mortgage ensures an interest rate is set in stone until your loan is paid in full. Plus, after you receive an FRM, you can focus on what's important – acquiring your dream home and enjoying this residence for years to come.
With an ARM, the interest rate for your loan may move up and down over the years. The factors that cause the interest rate to fluctuate are based on numerous market factors as well. Therefore, it can be tough to plan ahead for your monthly mortgage payments due to the fact that various factors may impact your loan's interest rate.
Determining whether an FRM is right for you can be challenging. Thankfully, banks and credit unions can define all of your home financing options and respond to any concerns and questions.
Furthermore, your real estate agent may be able to put you in touch with lenders in your area. This real estate professional also is happy to offer tips and recommendations to ensure you can get the financing you need to secure your dream house.
Examine all of your home financing options closely, and you should have no trouble obtaining a home loan that matches your budget.
