How Fixed Rate Mortgages Work

Even though the longer term fixed rate is one of the most common choices, there are also shorter term fixed mortgages which can help you pay off your loan in half the time, provided you can afford the monthly payments. You may also be able to find interest-only fixed rate mortgages, which have a starting lower payment amount because you pay the interest off first, and then pay off the principal.

During the time period where you're paying interest only, your monthly payment is set at a lower amount for a certain range of time - say, 10 years. Then, when it comes time to pay the principal, the monthly payment goes up accordingly and then stays at that rate for the duration of the loan. If you're not sure which type of fixed rate loan is right for you, a home loan consultant, such as those at Aurora Loans can help answer all your questions and create a home loan plan that fits your needs and budget.

Fixed rate mortgages offer a number of attractive benefits. If you're planning to stay in your home for more than five years, you'll be glad to know that fixed rate home loans offer protection against inflation, so if mortgage rates go up, you'll still be able to pay at the lower rate you locked in when you got your home loan. Plus, because your monthly payment is predictable and doesn't change for the duration of the loan, you can plan your finances out more fully and carefully because you know exactly what to expect. This is a low-risk way to own a home and protect your investment, making fixed rate mortgages a very popular choice for first time homeowners.

Of course, a common downside for fixed rate mortgages is that equity in your home builds up slower over time. You should also know that if interest rates drop, your mortgage won't go down (you'll still be paying at the rate you did when you got the fixed rate loan) unless you refinance. Here again, it's best to look for an established lender, such as Aurora Bank, who can help walk you through the process of getting a loan, from application to closing.

By working with a well-known company that's backed by the strength and solidity of a bank you can feel confident that you're getting excellent customer service. You will also get the experience from knowledgeable professionals who specialize in fixed rate mortgages and can help you create a workable payment plan to buy the home of your dreams.