Overview of a Fixed Rate Mortgage
The Fixed Rate Mortgage is a closed mortgage that offers you the peace of mind knowing what your payments will be the same for the entire term of the mortgage, offering competitive prepayment privileges so you can pay off your mortgage faster. There is an option for an open or closed fixed rate mortgage both of which serve a purpose in your home buying purchase.
Reasons to Consider a Fixed Rate Mortgage
An open fixed rate mortgage is a good option if you are anticipating a large sum of money in the near future, ie. an inheritance or a bonus, that you can apply to the mortgage. With an open rate mortgage you can pay off your entire mortgage at any time throughout the term, without penalty.
Fixed rate closed mortgages are the most common types of mortgages. These types of mortgages are particularly popular with the younger age group because it is viewed as a long term stable mortgage. Fixed Rate Closed Mortgage – are available for 1, 2, 3, 4,5, 7, 10 year Terms.
Disadvantages of a Fixed Rate Mortgage
The biggest disadvantage of an open fixed rate mortgage is that there is a large premium for this product. The premium is in the form of a higher interest rate.
All fixed rate closed mortgages offer Prepayment Options without you having to pay a penalty. Examples of prepayment options for a fixed rate mortgage, depending on the lender, are:
- You can pre pay an additional 15%-25% of the initial principle amount borrowed each year for the term of your mortgage. Payments can be paid in minimal increments of $100.00 – $1,000.00 any time during the year; and/or
- Increase your monthly mortgage payment by 15%-25% which can be converted back to the original monthly payment if needed.
- Some lenders also allow you to double up your monthly payments