Fixed Rate Mortgages
Fixed rate mortgages are just that. The rate is fixed for the entire period of the loan. Common version of this are a 15 year fixed or 30 year fixed. These days I hear of few people doing 15 year mortgages because of the higher payment. The advantage is that you loan is paid off in 15 years instead of 30 and the total of your payments is much lower. Might be a better strategy for some. Someday your home needs to be paid off and I see a lot of cases where people are forgetting they will retire and need a place to live while not collecting the same paycheck as they did while working.
Example:A $300,000 loan at 6% APR should cost you roughly $1800 a month. This would be the Principal and the Interest. As time goes on your payment is divided more to principal and less to interest. Year one you might get $100 credit in each payment towards the Principal, or balance, while in year 29 almost all will be going towards Principal.
When budgeting don’t forget about taxes and insurance. I recommend including these in your total payment and letting the bank disburse the funds. This total payment is called PITI. Principal, Interest, Taxes, and Insurance.
