A Comparison Between Fixed-rate and Variable-rate Mortgages
Fixed-Rate Mortgage: An Overview The term refers to a type of home loan that features a fixed interest rate from the start until the end. This concept means that the interest rate in fixed-rate mortgages does not fluctuate with the market conditions. It is a popular loan type for customers who are likely to have a clear idea about the monthly payment amount. The benefits it brings to the table are why the fixed-rate mortgage in Clearwater is a popular choice!
How does it work? Several types of mortgages are available in the market with two main categories: variable-rate loans and fixed-rate loans. In contrast to fixed-rate mortgages, variable-rate mortgages have fluctuating interest rates throughout the loans. Fixed-rate mortgages have the same interest rates throughout the length of the loan, irrespective of the current market situation. Simply put, the interest rate in a fixed-rate mortgage remains non-fluctuating whether the interest rates increase or go down. Fixed-Rate mortgages are more popular with home buyers. Several mortgages purchase a home for the long term and stay with a fixed interest rate with a fixed-rate mortgage. The popularity is because these rates are predictable, which keeps the loan borrower in a better place as they have a clear idea about the monthly amount they have to pay. Now, you know the reason behind the surge of traditional fixed-rate mortgages in Clearwater.
How is it calculated? The interest amount for borrowers who have opted for fixed-rate mortgages depends on the loan duration or the length at which the loan is amortized. As mentioned earlier, the interest rate on the mortgage and the payable amount for every month doesn't change, but how your money is applied remains variable. In the initial phase of repayment, the mortgage payment is made for interest, which changes at a later stage when the payment is submitted to the loan principal.
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