15 year fixed rate mortgage

What is a fixed rate mortgage?

Fixed rate Mortgage is where you are offered a fixed interest rate for the total loan time. The period offered is generally 15 year fixed rate mortgage and 30-year adjustment rate. In other words, we can say the rate of the mortgage remains same for the entire duration of the loan. One of the most popular forms of mortgage is fixed rate mortgage; almost 75% of the loans taken are of this variety.

One of the chief benefits of a fixed rate mortgage is that you know exactly when your term period is going to end, and you can plan your budget based on that. As with adjustable mortgage rate, the rate fluctuates; but with fixed mortgage rate, you know the amount you have to carry on throughout your loan period.

15 year fixed rate mortgage is where you have to pay your loan for duration of 15 years. Take for example you are going to buy a house. The lender offers you a fixed rate mortgage of 15 years. The rate given was 6% fro this whole 15 years. Now, the next year market rate rises to 7.5%. However, you are not affected, as, you were under the 15 year fixed rate mortgage. There are chances that in the following year the market rate drop down to 5.5%, and then you are not allowed to pay your loan at 5.5%. You have to maintain the fixed rate throughout the whole period of 15 years.

Why do you think 15 year fixed rate mortgage would be beneficial for you?

- The complexity of an adjustable rate mortgage is far more than fixed rate mortgage. Here you can understand the whole proceeding faster
- First time buyers get more security from taking the fixed rate mortgage loan
- If you were a calculative person and you like to plan your budget in accordance to your monthly expense, then this type of loan would suit you better. The 15 year fixed rate mortgage would give you time to make its allotment
- The fixed rate mortgage is a bit more than its adjustable rate mortgage counterpart is. Here, the lender is taking greater risk in giving out loan, so the charge is a bit more
- The initial monthly payment for a fixed rate mortgage is also more.
- Suddenly you experience a hike of 2% in the mortgage market. Had you been in adjustable rate mortgage scheme, there were chances that you have to think of earning some other ways to compensate the extra money you have to pay to your lender. However, as you are under the fixed rate mortgage scheme so you do not have to make that adjustment

Why is 15 year fixed rate mortgage more popular than its 30-year counterpart?

Suppose you are a young homebuyer and you are intending to pay off all your dues before your child starts to go to the college. 15 year fixed rate mortgage will give you the opportunity to do this. People with sufficient income would get the chance to repay the loan in a fixed time frame.