Fixed Rate Mortgage (FRM)
Fixed rate Mortgage is a type of loan that maintains a specified interest rate for the lifetime (or maturity) of the mortgage.
According to the Federal National Mortgage Association, first-time buyers often choose to go with a fixed rate mortgage because they want low monthly payments throughout the loan term. Buyers can also reap the greatest cumulative tax deductions available over the loan term when applying for the fixed rate mortgage.
Of course there are cons: generally, lenders require 20% down payments on conventional fixed rate mortgages, while with the Federal Housing Administration insurance, for instance, only 5% is required. Private Mortgage Insurance (PMI) can also help buyers purchase a home with only a 10% down payment. While buyers purchase private mortgage insurance (PMI) through private companies, lenders normally acquire the insurance for the buyers. So, first-year premiums are usually between .35% and 1.65% of the total loan amount, and depending on policy requirements, buyers must pay the premiums either in advance or monthly.
A twist on the 30-year fixed rate mortgage is the shorter term fixed rate mortgage, with either a 10 or 15-year loan term.
Real Estate Advice:
Knowledge is the best insurance; read our Real Estate Glossary so you can get up to speed with the real estate lingo!
Or better yet: access The OFFICIAL Real Estate Agent Directory® and find a real estate agent to guide you through insurance options and much more!
Popular Mortgage Terms
The amount of the original loan remaining to be paid. It is equal to the loan amount less the sum of all prior payments of principal. ...
The provision of the U.S. tax code that allows homeowners to deduct mortgage interest payments from income before computing taxes. Points and origination fees are also deductible, but not ...
An agreement by the lender not to exercise the legal right to foreclose in exchange for an agreement by the borrower to a payment plan that will cure the borrowers delinquency. ...
The process of determining whether a prospective borrower has the ability to repay a loan. Qualification Versus Approval: To be approved for a loan, a prospective borrower must ...
The specific interest rate series to which the interest rate on an ARM is tied, such as 'Treasury Constant Maturities, One-Year,' or 'Eleventh District Cost of Funds.' ...
The definition of a reverse mortgage is important for homeowners 62 and older who want to supplement their retirement income. What exactly is a reverse mortgage? Some say that it is the ...
The definition of an assumable mortgage is what happens when a buyer assumes or takes over a mortgage that the seller contracted. This is a type of financial arrangement that passes an ...
In general, a Down payment is a one-time payment a buyer makes to diminish the risks of the seller of expensive goods like a car, or a house. In Real Estate, the home buyer makes a down ...
The interest rate that is fixed for some specified number of months or years at the beginning of the life of an ARM. ...
Have a question or comment?
We're here to help.