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There are several kinds of mortgages offered by lenders in the market. The most general of these types is fixed rate mortgages. Fixed rate mortgage loans are characterized by fixed rates and monthly payments that are generally for a 15-year and 30-year periods.

Fixed rate mortgages are popular in the purchaser market as a result of its stability. The majority of consumers are hesitant to get house loans where the rates fluctuate with the changing interest rates of the market. Fixed rate mortgages are generally extremely reasonable, specially when rates are low.

Consumers of fixed rate mortgages are faced with having to choose between a 15-year fixed rate mortgage or a 30-year fixed rate mortgage. Some prefer 15-year fixed rate mortgages because of the shorter duration. Other consumers choose 30-year fixed rate mortgages for the reason that the payments are significantly lower than the former.

Each category of fixed rate mortgages definitely has its own benefits and disadvantages. Here are some of them.

30-year Fixed Rate Mortgage - Pros and Cons

A 30-year fixed rate mortgage gives clients the opportunity to borrow cash on a long-term basis. They do this without having to be alarmed about the change that might arise in fixed rate mortgage interest rates or payments of such.

As the interest of a 30-year fixed rate mortgage is amortized over a longer time, the monthly payments for this are lower than those on 15-year loans. Lower monthly payments on 30-year fixed rate mortgages give consumers an additional resource which they can pour into other worthy investments.

On the other hand, this could also cause a small drawback for 30-year fixed rate mortgage borrowers. The overall interest bill of a 30-year fixed rate mortgage is much higher as a result of the long amortization period. And for the reason that payments for 30-day fixed rate mortgages are typically used to pay up the interest rather than the principal at first, borrowers will be building up their equity at a slower pace.

The high interest rates of 30-day fixed rate mortgage loans do not essentially stop consumers from taking this category of loan. They reason that higher interest bill for 30-day fixed rate mortgages increases the amount they can deduct at tax time. This could potentially lessen or perhaps, even reduce their federal income tax liability.

15-year Fixed Rate Mortgage - Advantages and Disadvantages

One of the benefits that attract borrowers into taking a 15-year fixed rate mortgage is the fact that amortization periods for this type of loan are usually shorter. This allows 15-year fixed rate mortgage borrowers to build equity much faster. And with a 15-year fixed rate mortgage, the overall interest bills are low - in any case, greatly lower than those of longer-term loans. Interest rates of a 15-year fixed rate mortgage are also lower than 30-year loans.

The disadvantages however involve considerably higher monthly payments, specially when compared with 30-year fixed rate mortgages. This setback of having a 15-year fixed rate mortgage may restrict home buyers to smaller houses than they might be able to afford with longer-term loans.

There are as well other factors to think about when choosing which category of fixed rate mortgage you want to take. Take into account that you can actually do a prepayment for your fixed rate mortgage, that way, the principal amount may be considerably reduced each month. Like this, fixed rate mortgages may even be paid off sooner than the projected term.

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