A Brief Introduction To Fixed Rate Mortgages

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Fixed Rate mortgages are the traditional loans where the loan interest rate on the loan is fixed, right from the beginning throughout the term. These loans do not have the option of flexible interests or monthly pay-outs, so the payments are always the same for every instalment during the term. Also, these are fully amortized, that means payment is completed at the end of the loan term.

Parameters for Fixed Rate Mortgages

Fixed rate mortgages have a few parameters that define them – the loan amount, interest rate, compounding frequency, and duration. The monthly payments are calculated based on these. Since there are no flexible or “floating” components, a borrower knows exactly what is the due payment. This brings in consistency, and allows the borrower to plan the budget and remaining finances with much efficiency.

The rate of interest for these are not flexible or reset ever during the term, but is fixed right at the beginning and is advertised well in advance. Since the rates are never rest, in a way, fixed mortgages are bound to higher monthly instalment. The borrower does not benefit from a favourable turn in the market, but is also safe from an adverse impact.

While some users believe that the fixed rate of interest is a safe option, though they tend to miss out on the possible reduction, the overall confidence in knowing the exact payment every month does make it a preferred option to many. The borrower does not face the risk that sudden inflation and rate spikes can lead to, causing a sudden financial crunch for the individual.

Which loan suits you best? Let our expert team of advisors at New City Financial assist you to arrive at the best option. Visit our website or call us to know more about how we can help you get more bang for your bucks.