A traditional fixed-rate mortgage is the type of mortgage that comes to mind for most individuals when thinking about buying a home. With a traditional fixed-rate mortgage, a set interest rate is applied to the loan and paid monthly, typically added to the mortgage payment. Fixed-rate mortgages may have a term of 10 to 30 years; dividing the loan balance plus interest by the length of the term so the loan is paid off in full by the end of the term (call amortized). Even though the loan is amortized to be paid off at the end of the loan term, fixed-rate mortgages can be paid off early without penalty.
It is common for most fixed-rate mortgages to require a down payment of 20% but there are many loan programs available that allow for less—some even as low as 3% down.
Depending on the loan program and loan provider, your fixed-rate mortgage process may include setting up an impound account—more commonly known as an escrow account. It is common for this type of account to be created when financing a home. Besides your monthly mortgage payment, your loan servicer will collect an additional amount to cover the costs of property taxes and homeowner’s insurance. The additional amount is added into the monthly loan payment and placed into the escrow account to be annually dispersed to your tax collector and homeowner’s insurance carrier on your behalf. You may see your monthly payment fluctuate if your property taxes or your homeowner’s insurance premium changes (but your loan and interest payment will remain the same).
Fixed-rate mortgages are a popular home loan choice. To discuss more about fixed-rate mortgages or to determine which loan program will best suit your buying needs, contact one of our mortgage loan originators at BlueGrey Mortgage.