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Are you ready to start shopping for a home loan? Fixed rate mortgages are one of the most popular ways to finance a home purchase or refinance an existing mortgage. There are many different loan programs available for fixed mortgages.
This type of mortgage loan has a steady interest rate that won’t change, even if market interest rates fluctuate up or down. Your interest rate can be locked in by your lender when you reach a certain stage of the home loan application process.
Lenders offer higher or lower mortgage rates based on a variety of factors, including your loan term, your down payment, your credit score, and whether or not you can reduce your interest rate by purchasing “points” at closing.
A fixed mortgage is usually set for a 15- or 30-year term. If needed, a shorter period of time like 10 years or mid-range terms like a 20- or 25-year mortgage can be obtained. A 30-year fixed rate mortgage will mean lower monthly mortgage payments, but you’ll pay much more interest over those years compared to a 15-year fixed rate mortgage.
Fixed rate loans give you more predictability and stability in your mortgage payments. Your monthly payment will stay the same over the life of the loan, divided between monthly principal and interest allocations.
At first, your payments will mostly go towards the interest owed on your loan amount. Over the years, more of your monthly payment will go towards the principal, and interest owed will decrease as your total loan balance decreases.
An adjustable rate mortgage (ARM) is assigned an interest rate according to the mortgage rates when your loan originated. However, your monthly payment is subject to change without notice, increasing or decreasing over time as mortgage rates go up and down.
This means that an ARM can be a gamble. If interest rates go down, you’re in luck, as you’ll pay a lesser amount of interest. If interest rates go up, you could end up paying tens of thousands of dollars more over the loan term than you originally thought.
Your annual percentage rate (APR) is your actual total cost of your loan calculated as an annual percentage, and is required to be disclosed by lenders. The APR includes all of the costs and fees associated with your loan (including loan origination fees, closing costs, and mandated mortgage insurance if applicable) plus your interest.
With a fixed rate loan, the APR stays the same. With an adjustable rate loan, the APR will change based on current mortgage interest rates. In some cases, lenders may offer a fixed rate period that switches to an adjustable rate later in the term. It is important to note that the APR is not the rate of interest you actually pay. APR is an attempt to give you an overall cost of the loan over the entire term calculated as an annual percentage rate. If you pay your loan off early either by paying off the loan in full or making additional payments the APR will not be accurate; however, the rate of interest you pay stays the same until your loan is paid off.
For a lower interest rate and monthly payments on your mortgage, your lender may allow you to purchase discount points (paid for at closing). Typically, a discount point costs 1% of the total loan amount, and drops your interest rate by a quarter of a percent.
This can be a good plan of action if you don’t plan to sell your home or refinance it before the savings in interest equals or exceeds what you paid for the discount points.
There is no one-size-fits- all loan program. It is important to discuss the details of your current financial situation with a qualified Loan Officer who can advise you about all of your options available.
Now is a great time for looking into a fixed rate mortgage. You can use our free Instant Rate Quote tool and Rate Tracker to find out how much you could be saving every month or over the life of your loan.
At Sammamish Mortgage, all of our Loan Officers (LOs) are salaried. This means they always put the client first, making sure you get the best loan for your budget, not the biggest one to earn a commission.
We offer some of the most competitive rates in the nation, and it’s our goal to give you a hassle-free home loan experience. We’re proud to say we close most of our loans in 30 days or less. We offer a wide variety of home loans, including FHA and VA loans, so you can start looking for a home as soon as possible.
For more information on your fixed rate mortgage options, feel free to contact us today. We currently lend in all of Washington, Oregon, Idaho and Colorado. Our friendly team of experienced mortgage professionals will advise you on which home loan program best meets your needs.
Are you ready to apply for your home loan and lock in a low interest rate? If so, Sammamish Mortgage can help you get started. Get in touch with us today!