Fixed Rate Mortgages
The traditional fixed rate mortgage is the most common type of loan program, characterized by its stability and predictability. Here are the key features:
- Fixed Monthly Payments: The principal and interest payments remain unchanged throughout the life of the loan.
- Loan Terms: Available in terms ranging from 10 to 30 years.
- Early Payoff: In most cases, the loan can be paid off at any time without penalty.
- Amortization: The mortgage is structured to be completely paid off by the end of the loan term.
Impound Account
Even with a fixed rate mortgage, your monthly payment might vary if you have an "impound account." Here’s how it works:
- Additional Monthly Collections: Besides the monthly principal and interest, and any mortgage insurance premium (for those with less than 20% down payment), some lenders collect additional funds for the prorated cost of property taxes and homeowners insurance.
- Impound Account: The extra money is placed in an impound account by the lender, which is used to pay property taxes and insurance premiums when they are due.
- Payment Adjustments: If property taxes or insurance costs change, the monthly payments may be adjusted accordingly.
Despite these potential adjustments, fixed rate mortgages provide a high degree of stability and predictability in overall payments.