Best Fixed Rate

By Edwin Brooks

Fixed rate mortgages - the name says it all. You get a fixed rate that stays the same for the life of the loan, usually 15 or 30 years. Although your interest rate will be a little higher than with an ARM, you will know exactly how much you´ll pay per month for a few decades. If you love stability, this loan is probably for you. Also when interest rates are low, this is the loan that lets you cash in for years to come.

ARMs, on the other hand, are anything but stable. These loans generally have a lower initial interest rate than fixed rate loans (usually around 2% less). This initial teaser rate usually lasts anywhere from 1 to 10 years. You´ll know it´s an ARM when you see 3/1, 5/1, 10/1; respectively, these are 3, 5, and 10 year fixed rates. After the set time, the rate varies based on a standard, usually the Treasury Bond rate. The rate can change monthly or yearly, but yearly changes usually work out best for the consumer.

With a fixed rate mortgage the home buyer has the benefit of having a mortgage payment that will be the same every month for the life of the loan. They will also know exactly the amount they are going to pay. With a flexible rate mortgage the home buyer will have different payments each month as the interest rate goes up and down.

Fixed rate mortgages are the mortgage type of choice for homeowners and first time buyers. Hardly surprising with the Bank of England dropping interest rates to 0.5 per cent and holding the rate in April.

You may think you need to shop around for the cheapest rate in order to secure the best fixed rate mortgage, but that is not necessarily true. Most of the time fixed rate mortgages will be identical from one lender to the next one. Once you have done some research and determined that the rates are indeed identical, you should look at the lenders reputation.

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This article has been written by the author, Edwin Brooks . Should you require any moreBest Fixedplease visit his Mortgage Interest Rate resources!