There are different types of mortgages offered by the lenders in the market. The most popular and common mortgage of these types is fixed rate mortgage. The fixed rate mortgage loans are practical based on fixed rates and monthly payments that are generally for the time period of 15 years and 30 years.

The Fixed rate mortgages are very popular in the consumer market the reason behind that it is having stability. Many consumers are hesitating to get the house loans where the rate fluctuates every time with the changing interest rate of the market. The fixing rate mortgages are generally easily affordable, especially when the rates rate very low.

Consumers of the fixed rate mortgages are faced with having to choose the time period between 15 years or 30 years fixed rate mortgage. Some consumers prefer for 15 years fixed rate mortgage because of the short time period. On other hand those who choose 30 years fixed rate mortgages because the payments are considerably lower than the former.
Each type of fixed rate mortgages is having certain types of merits and some demerits. Few of them are discuss below.

Merits of 15 years fixed rate mortgage
The major advantage that attracts borrowers into taking a 15 year fixed rate mortgage is the fact that amortization periods for this type of loan are usually shorter. The fixed rate mortgage allows 15 years borrowers to build the equity much quicker. And after that with the 15 years fixed rate mortgage, the overall interest bills are low at least in compare to the long term period loans. The interest rates of 15 years fixed rate mortgage are also lower than 30 years loans.

Demerits of 15 years fixed rate mortgage
The demerits however include significantly higher monthly payments, especially when compared with 30 year fixed rate mortgages. This set back of having 15 years fixed rate mortgage may restrict home buyers to smaller houses than they might be able to afford with long term period loan.

Merits of 30 years fixed rate mortgage
The 30 years fixed rate mortgage plan gives consumers the opportunity to borrower to borrow money on a long term basis period. Borrower do this without having to worry about the change that might be occur in the fixed rate mortgage interest rates or payments of such. Because the interest rate of the 30 years of fixed rate mortgage is amortized over for a longer period, the monthly payment in this is lower than those on 15 years fixed rate mortgage loans.

Demerits of 30 years fixed rate mortgage
On other hand, there are some demerits are also there. The overall interest bill of a 30 years fixed rate mortgage in higher and the reason behind that is the long amortization period. And therefore the payments for 30 days fixed rate mortgages are usually used to pay up to the interest rather than the principal at first, borrowers will be building up their equity at the slower pace.

There are also some other factors to be consider when choosing which type of fixed rate mortgage you want to take. You have to keep in your mind that you can actually repayment for your fixed rate mortgage, by that way the principal amount may be significantly reduced each month. In this way, your fixed rate mortgage may even be paid off sooner than the projected time period.

Tags: fixed rate mortgages, merits & demerits, mortgage interest rates

This entry was posted on Tuesday, November 11th, 2008 at 1:16 am and is filed under Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.