The average mortgage rate in United States currently is 3.5%. The fixed mortgage rate for 30 years is 3.86% and for 15 years in 3.15%. Most people who have not undertaken a mortgage loan would be curious to know about what is FRM or fixed mortgage rates. The other names for these loans are “vanilla wafer loans.
What are they all about?
These mortgage rates are known as fixed as the interest rates paid by the owners remains constantly fixed for the entire loan duration. The interest rates do not fluctuate like the floating or adjustable mortgage rates. The person thus is indifferent to the fluctuating mortgage rates in the loan market and enjoys a fixed repayment amount for its entire mortgage loan period. Here the Fixed Mortgage Rates are not fixed to an index. The interest rate is fixed well in advance and is usually incremented by ¼ or 1/8 %. Here the mortgage loan owner can also plan his budget well in advance and pay his mortgage repayment amounts in a timely manner.
Why are they so popular?
The popularity of fixed mortgage rate can be credited to the vast efforts of FHA or US Federal-Housing Administration which standardized the rates and offered it as an alternative solution to balloon mortgage payment plan. The payment pattern of the balloon mortgage was such designed which made the loan owners pay a large amount at the end of their loan payment tenure. However most homeowners were unable to make this payment and this lead to large scale foreclosure and many homeowners lost their homes to. But in the case of fixed mortgage rates the payment pattern was same for every month and this continued till the last month in the mortgage repayment plan.
What is the duration of these loans?
The fixed mortgage loans are very classical in nature and can be undertaken under two major groups mainly. These loans can be taken for 15 years and 30 years. In certain case loans for shorter period is also available but the 15 years and 30 years loans are popular among American homeowners.
What are the natures of these loans outside USA?
Fixed mortgage loans are not quite popular in countries outside USA. In most cases the fixed mortgage loans are not available for long term loans and are just available for short duration loans. In Canada for instance the fixed mortgage loan is available for loan duration of which are for 10 years. Here the average mortgage loans are for 25 years. In United Kingdom the fixed interest rate for mortgage loans is not popular. Here homeowners prefer the popular variable rate mortgages. This variable rate mortgage is popular as it reduces the interest rate in the long run.
Are these rates more expensive?
Mortgage loan experts would point out the fact that fixed mortgage rates are more expensive than mortgage rates which are adjustable in nature. In most cases they have a higher interest rate at the beginning of the loan period.