As mentioned before a fixed rate mortgage has maintained its popularity with borrowers over several decades. In fact this was the only kind of mortgage that was offered to borrowers a few years back before more progressive variations of mortgage loans such as the variable rate mortgage were brought into practice. While other kind of mortgage loans have gained in popularity a fixed rate mortgage still continues to enjoy its position as the most sought after style of home loan. A fixed rate mortgage as the following advantages.
- A fixed rate mortgage offers security to the borrower as the payment remains constant about the tenure of the mortgage.
- Fluctuations in the interest rate in the economy does not affect the borrower. He continues to enjoy the same interest rate that he signed up for in the mortgage contract. If the interest rate in the economy increases the borrower continues to pay the low interest rate and if the interest rate decreases the borrower may have the option of refinancing the mortgage into a low rate.
- Most of the fixed-rate mortgages allow the borrower to make lump-sum payments directly towards the principle of the loan that allows the borrower to pay off the mortgage earlier than the decided term as well as decreasing the amount to be paid as interest towards the entire home loan. The borrower can choose to make the lump-sum payment according to the terms and conditions decided with the home loan lender. Paying half the monthly mortgage payment every two weeks pace of a 30 year fixed rate mortgage in about 22 years. One extra payment per year may reduce the amortization period of the mortgage to about 26 years. Additional lump-sum payments or additional by monthly payments are not compulsory and are usually a matter of choice on the behalf of the borrower.