When they are in the big financial crisis, many home owners want to refinance their house which they got through loan. So that they can save significant money they are spending on their monthly mortgage payments. It is a good idea to get out of the debt but if you attempt to refinance your house with the bad term it may create an even worse financial situation for you. Most of the home owners do not aware that they can actually choose many different terms while purchasing their mortgage loan.
When you sign up with the long term loan definitely you will be required to pay off higher interest rates when compare to the short term loans. Also you will be paying most of your monthly mortgage payments with regards to your interest not towards the mortgage. You can consider refinancing your house through 10 year fixed rate mortgage because it comes with several advantages.
Rest of this article is dedicated to explain the advantages of fixed rate mortgages.
Fixed rate mortgages
As the word implies in fixed rate mortgages, the interest rate you need to pay over the tenure will not get change. Because of the fact, homebuyers do not need to worry about the sudden raise in the interest rate so many people prefers to choose fixed rate mortgages only. So it is very popular among all homeowners who want to buy a mortgage through mortgage loans.
When it comes for fixed rate mortgages 3 types of most common long term mortgages are preferred by the people.
- 30 Yr FRM
- 15 Yr FRM
- 10 Yr FRM
30 Yr FRM (30 year fixed rate mortgage)
In this term you can repay your mortage loan (principal + interest) in 30 years. Days will be calculated from the day you have approved for the mortgage loan to next 30 years.
15 Yr FRM (15 year Fixed Rate Mortgage)
This long term mortgage program tenure is 15 years. It is very similar to the 30 year fixed rate mortgages but you need to repay the loan within 15 years.
10 yr FRM (10 Year Fixed Rate Mortgage)
Tenure of this long term mortgage program is 10 years. That is you should pay off the interest + principal within 10 years from the day you get an approval for the 10 year fixed rate mortgage.
What are the other different terms?
30 yr FRM and 10 yr FRM are well known in the fixed rate mortgages. But there are other different terms are also exists like 15 yr FRM, 20 yr FRM, 25 yr FRM. If you can pay only minimum amount on your monthly mortgage payment then it is advisable to choose the long term mortgage program. Since you are paying in a long tenure interest rate you will need to pay will be higher. That is you will pay more on interest and less on your mortage each month. You can calculate the monthly mortgage payment through an online mortgage calculator.
Down side of 10 Year Fixed Rate Mortgage
When you choose this 10 Year FRM you need to pay larger monthly payment on your mortgage. Anyhow here you are paying more towards your mortgage instead of interest. So it will not be a disadvantage for the people who can able to manage this larger monthly payment. But what when the financial crisis or economic quake hits your finance anywhere between these 10 years? Having a large monthly payment may lead to a foreclosure in the worst situations. So it is always wise to talk with your mortgage loan lender or banker about which mortgage program will best suit to your present and future financial situation.