What Is a Fixed-Rate Mortgage?
Are you starting to look into the different mortgage options that you’ll have so that you’re all ready to go once it’s time to buy a house? You’re going to find that there will be no shortage of options available to you!
There are many different types of lending options for those interested in taking out a home mortgage. But regardless of which one you choose to go with, you should always try to obtain a fixed-rate mortgage.
So, what is a fixed-rate mortgage? How does a fixed-rate mortgage work? And where can you apply for a fixed-rate mortgage?
We’re going to answer all of these questions—and more!—for you today. It’ll help you to understand more about fixed-rate mortgages.
We’re also going to sprinkle in some other financial advice along the way to guarantee that you’re prepared to take out a mortgage. Continue reading to get your hands on it.
What Is a Fixed-Rate Mortgage?
Before we begin talking about how a fixed-rate mortgage works and who should apply for one, it’s important for you to know the fixed-rate mortgage definition. So let’s kick things off by answering the question, “What is a fixed-rate mortgage?”
The good news is that it shouldn’t be all that difficult for you to figure out what a fixed-rate mortgage is. It’s a mortgage that has an interest rate attached to it that is fixed. This means that it won’t ever change throughout the life of a loan that you take out to buy a house.
A fixed-rate mortgage is the opposite of an adjustable-rate mortgage, which we’ll talk about in a few minutes. It has turned into the go-to option for those considering mortgage options and looking for the best home mortgage.
How Does a Fixed-Rate Mortgage Work?
Now that you know what exactly a fixed-rate mortgage is, it’s time for us to discuss how one works. So let’s get right into it.
When you decide that you want to take out a fixed-rate mortgage, a lender will sneak a peek at your credit report, your income level, etc. and tell you what rate you would qualify for. The better that your financial situation, the lower that your interest rate will be.
They’ll also ask you whether you want to take 10, 15, 20, 25, or 30 years to pay down a mortgage in most cases and use that to calculate an interest rate for you. But regardless of which interest rate a lender gives you, you can rest assured knowing that it won’t change once you take out a mortgage. That interest rate will be your interest rate for the life of your loan.
What Is the Difference Between a Fixed-Rate Mortgage and an Adjustable-Rate Mortgage?
As we mentioned a few moments ago, a fixed-rate mortgage is the opposite of an adjustable-rate mortgage. So, what is an adjustable-rate mortgage?
Well, just like with a fixed-rate mortgage, an adjustable-rate mortgage will keep the same interest rate for a certain period of time (usually 10 years). But once that time is up, the interest rate on an adjustable-rate mortgage will then move up and down based on the real estate market conditions.
In some instances, you might be able to reduce your interest rate with an adjustable-rate mortgage. But oftentimes, you’re going to see your interest rate go up with an adjustable-rate mortgage.
This makes adjustable-rate mortgages very risky for those who plan on living in their homes for an extended period of time. If you’re going to stay in a home for any longer than 10 years, you’ll probably want to choose a fixed-rate mortgage rather than an adjustable-rate one.
Who Should Apply for a Fixed-Rate Mortgage?
If you’re preparing to purchase a home at some point in the near future and you’re looking to stay in that home for the foreseeable future, a fixed-rate mortgage is going to be the right option for you. It’ll ensure that you’re able to pay your mortgage every month throughout the duration of your home loan.
And even if you’re not planning on staying in a home that you would like to buy now for the long haul, you still might benefit from a fixed-rate mortgage more than an adjustable-rate one. You never know how your finances are going to shake out in the years to come, and the last thing you want is to put yourself in a position where you suddenly can’t afford your mortgage payments anymore.
Where Can You Apply for a Fixed-Rate Mortgage?
Do you think that you would like to try to take out a fixed-rate mortgage so that you can buy a home? Here are the simple steps that you’ll have to take to do it:
- Find a lender that specializes in providing homebuyers with fixed-rate mortgages
- Apply for a fixed-rate mortgage through your preferred lender
- See what kind of interest rate a lender can give you on a fixed-rate mortgage
- Decide whether or not you’re satisfied with the loan that a lender can provide for you on a fixed-rate mortgage
- Complete the application process for a fixed-rate mortgage and attempt to get approved for it
If you’re interested in trying to obtain a fixed-rate mortgage so that you can buy a home, go discover more about how to do it.
See If You Can Secure a Fixed-Rate Mortgage Today
Prior to purchasing a home, most people will have to secure a mortgage. Not everyone is able to buy a home outright with cash.
But you shouldn’t apply for just any old mortgage when you need to take one out. You should go with one of the best kinds of mortgages around.
A fixed-rate mortgage definitely fits the bill. And now that you know the answer to the question, “What is a fixed-rate mortgage?”, you should feel comfortable with the idea of applying for one. You should look into getting this type of home mortgage ASAP so that you can put the finishing touches on buying a house soon.
Look for more tips on taking out a mortgage in some of the other real estate-related articles found on our blog.