25 year fixed rate mortgage: period of fixed interest

2007-03-08 10:33:40

( Financial )



FIXED PERIOD

The term fixed mortgages can be a misnomer because the fixed arrangement is not fixed at all. A fixed mortgage lasts for a specific period of time, usually lasting from as short as five years to thirty years.

Ideally, the plan is that after the prescribed period, the loan would have already been paid off. However, if you have not settled the loan after the fixed rate period, some adjustments will be made on your fixed mortgages interest rate. You will have the option to extend the fixed rate for another term, but the interest rates will be different, or you may opt for a variable term for the remainder of your mortgage loan.

LONG TERM LOANS

Because houses and properties are very expensive, mortgages are often long-term loans. Unless you expect some amount of money that will allow you to settle your fixed mortgage sooner, the loan usually lasts some considerable amount of years.

Usually, the shorter the term of fixed mortgages, the lower the interest rate charge is. A 25 year fixed rate mortgage has a higher interest rate than a 40 year fixed rate mortgage, and consequently, the monthly payments for a 25 year fixed rate mortgage is also higher.

Of course, this makes sense in light of the fact that there is a 15 year difference of regular monthly payments between a 25 year fixed rate mortgage and a 40 year fixed rate mortgages.

Each fixed mortgages plan has its own advantages and disadvantages. It can be tricky to choose the term of the fixed rate mortgage that best suits your household because there are so many variables that can affect your ability to pay. When deciding on what fixed mortgage to get, you have to be forward looking and take into your account your growing family’s needs as well.


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