Which Frm Is The Right One For You?

By Author: Scott F. Staudt
Total Articles: 91
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Understanding a FRM is simple: it is a fixed rate mortgage with as little as ten or as much as forty year's maturity. When the loan is spread out over a longer term, the payments will be less, but of course the loan will take a longer time to pay off. Most borrowers seek to find the perfect blend of the payment they can afford and the shortest maturity.

But it is important to make sure that you can afford the higher monthly payments on a longer maturity FRM. But shorter term ones require higher monthly payments and an FRM with a term of 10 years may have twice the monthly payment of an FRM of 40 years.

Banks will also expect a higher interest rate on longer term FRMs because their interest rate exposure is greater.

Because of these various blends, the 15 to 30 year FRMs are usually the ones that give the best mix of lower monthly payments with reduced overall costs and lower interest rates. Conversely, a 40 year term will have low payments but a relatively high interest rate.

Many homeowners today choose the 15 year FRM for lowest rates and lowest payments.

You can have the projected monthly ...
... payments calculated by a mortgage broker. If you can't afford this mortgage payment, you can then move into a longer maturity until you meet the amount you have budgeted for your mortgage.

Another thing to think about is that even if you pick a long term FRM for current affordability, you can shorten the maturity yourself by eventually paying more on the martgage. This is often a solution to a homebuyer who can only afford "x" today, but as his income increases, can afford to pay more. Any extra payments you can make on your mortgage will serve to shorten the maturity of the mortgage.

A quick call to a mortgage broker, or a perusal of the internet will allow a potential borrower to calculate the payments required on each term of a mortgage at given rates. This is doable on the internet, but sometimes it is just easier to have a broker make the calculations.

In either case, the goal is to find the FRM that will give you the monthly loan payment you can afford while keeping the term of the maturity as low as possible.
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