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Follow on Google News | Fixed Rate Mortgage - Quick Facts For BeginnersFixed Rate Mortgage or FRM is the type of loan which is lent to finance the private ownership of the property with the fixed interest rate throughout the term. Federal Housing Authority (FHA) was the one that launched FRM.
By: Canada Banks The rate of interest in fixed rate mortgage is typically fixed but other charges such as property taxes and insurance can vary. The monthly payment in FRM is calculated by the basic features i.e. interest rate, tem of mortgage, compounding frequency and amount of loan. The borrower pays a fixed amount per month to make sure that he is able to pay all the amount due at maturity along with the interest. Following are the characteristics of fixed rate mortgage: The FRM rate of interest is not dependent on index points; instead it depends on publicized rates in advance, in share of 25% or 12.5%. The rate of interest till maturity of loan is known as "fully indexed rate" and it is determined with sum of index and margin. Term is the length of the mortgage loan and the number of payments depends upon this length and the frequency of the payments. Fixed rate mortgages are usually more expensive than ARM. In FRM, with increase in duration of mortgage, rate of interest and risk also increases. This is the reason of fixed rate loans being bit expensive as compared to short term loans. The difference between the both durations in the rate of interest and yield curve is their values' difference. The expensiveness of FRM does not imply it's a bad option; rather the advancer is taking the risk basically. If interest index rises, the ARMs will cost higher where FRM will remain the same. You can make advance payments in some countries with any consequences. This reduces the total amount of the loan, interest on the loan and hence will shorten the length of time needed to pay off the loan. Sometime lenders offer mortgages with very low interest rate but restricting the prepayment. In such cases, if advance payments are made the acquirer of the loan has to pay fine too. To calculate your mortgage rates please use this mortgage calculator: http://www.canadabanks.net/ # # # Canadian Banks focuses on the Canadian banking industry, featuring articles about Canadian financial institutions, mortgage, credit and debt. The site also features loan, mortgage and credit calculators. http://www.canadabanks.net End
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