Fixed Rate Mortgage (FRM)
Fixed rate Mortgage is a type of loan that maintains a specified interest rate for the lifetime (or maturity) of the mortgage.
According to the Federal National Mortgage Association, first-time buyers often choose to go with a fixed rate mortgage because they want low monthly payments throughout the loan term. Buyers can also reap the greatest cumulative tax deductions available over the loan term when applying for the fixed rate mortgage.
Of course there are cons: generally, lenders require 20% down payments on conventional fixed rate mortgages, while with the Federal Housing Administration insurance, for instance, only 5% is required. Private Mortgage Insurance (PMI) can also help buyers purchase a home with only a 10% down payment. While buyers purchase private mortgage insurance (PMI) through private companies, lenders normally acquire the insurance for the buyers. So, first-year premiums are usually between .35% and 1.65% of the total loan amount, and depending on policy requirements, buyers must pay the premiums either in advance or monthly.
A twist on the 30-year fixed rate mortgage is the shorter term fixed rate mortgage, with either a 10 or 15-year loan term.
Real Estate Advice:
Knowledge is the best insurance; read our Real Estate Glossary so you can get up to speed with the real estate lingo!
Or better yet: access The OFFICIAL Real Estate Agent Directory® and find a real estate agent to guide you through insurance options and much more!
Popular Mortgage Terms
Authorization by the lender for the borrower to pay taxes and insurance directly. This is in contrast to the standard procedure, where the lender adds a charge to the monthly mortgage ...
Often referred to as a “second mortgage”, a home equity loan is a type of loan where the borrower disposes to the lender its equity to the home as collateral. To ...
A mortgage on which half the monthly payment is paid every two weeks. This results in 26 payments per year, which is the equivalent of 13 monthly payments rather than 12. Because of the ...
Refinancing for an amount in excess of the balance on the old loan plus settlement costs. When the main objective of a refinancing is to raise cash, the relevant question is whether the ...
A payment made by a lender to a mortgage broker for delivering an above-par loan. A par loan is one on which the lender charges zero points. Lenders charge points on loans carrying ...
The period between payment changes on an ARM, which may or may not be the same as the interest rate adjustment period. ...
A mortgage on which the borrower gives up a share in future price appreciation in exchange for a lower interest rate and/or interest deferral. SAM's in the private market had a brief ...
A borrower who must use tax returns to document income rather than information provided by an employer. ...
On an ARM, the assumption that the value of the index to which the interest rate is tied does not change from its initial level. ...
Have a question or comment?
We're here to help.