Understanding Fixed Rate Mortgages in Allentown, PA
Anyone looking to buy a home usually will consider a mortgage. A mortgage helps you buy a house otherwise you couldn’t afford. You will find there are several types of mortgages. One type of loan offered by lenders is the fixed rate mortgage in Allentown, PA. A fixed rate mortgage means the interest will not increase or decrease during the loan term. Standard terms for fixed mortgages are 15 or 30 years. They are popular because consumers like the stability. Many home buyers prefer not to take mortgages in which the interest varies. Mortgages with fixed rates tend to be more affordable since rates remain constant.
Borrowers typically prefer the thirty-year term of the fifteen-year term. The thirty-year periods commonly have a lower interest than the fifteen-year period. Other borrowers may prefer the fifteen-year period because it is shorter. Each term has pros and cons.
A thirty-year fixed rate mortgage provides the borrower with a chance to take a mortgage with a longer duration. The payments will be lower since interest is amortized with a longer term. This is an advantage for the borrower since it gives home buyers an extra resource. One con of fixed interest rates on a thirty-year term is the higher interest rates due to the longer amortization schedule.
Another disadvantage of the thrit-year term is it takes longer to build equity since you are paying toward the interest the first several years. However, a home buyer can claim the interest as a tax deduction. One advantage of a fifteen-year period is the amortization schedule is shorter which permits the home owner to increase equity faster. A fifteen-year fixed rate mortgage has a lower interest rate. However, the monthly payments will be more than a thirty-year term.
Fixed rate mortgages do have many advantages over adjustable rate mortgages. Adjustable rate mortgage can increase or decrease which makes it harder to plan payments. While varied rates can drop low, they can also go higher which increases monthly payments. Fixed rates are steady so you know what you will be paying which helps you budget better. The term you choose depends on your needs. It is suggested to study them carefully.
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