How To Pick The Best Fixed Rate Home Loan

By Author: Scott F. Staudt
Total Articles: 91
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An FRM (fixed rate mortgage) may have a term as short as ten or as long as forty years. The longer the term, the lower the mortgage payments will be, but the negative side is that the borrower will be paying for a long time. The best solution for most borrowers is to find the FRM that combines affordable monthly payments with the shortest term possible.

The longer term FRMs cost a lot more over the course of the life of the mortgage. A FRM of just ten years can carry monthly payments that are up to twice as high as those of a 40 year loan.

Another concern is that, now that the bank has a longer period of risk, it will charge a higher rate for this longer term mortgage.

For these reasons, the 15 and 30 year mortgages are the ones that are the most popular among home buyers, with 15 years carrying the lowest rates and 30 years the highest. Needless to say, forty year mortgages will have the highest interest of all.

Most people, therefore, find that the fifteen year term fixed rate loan carries the best combination of affordability and low interest rate.

Once your mortgage broker has calculated ...
... the amount of monthly payment you can expect to pay on a fifteen year home loan, you can then decide if this is what you can afford. Once you look at one term, and determine that the payments are too high, you can look at longer terms until you find the right balance.

Even with a longer term mortgages, be aware that you have the option to pay your loan down sooner. This is often a solution to a homebuyer who can only afford "x" today, but as his salary increases, can afford to pay more. Making additional payments on the principal will effectively lower the total term of the loan in any case.

A quick call to a mortgage broker, or a perusal of the internet will permit a potential borrower to ascertain the payments required on each term of a mortgage at different rates. The internet is a good source, but many people find it easier to just work with a mortgage consultant to do these calculations.

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