In the mortgage and lending world, there are many official-sounding terms. They sound complex and can be confusing even for experienced real estate professionals. Zion Mortgage is here to help and try to explain some of those terms. You may have heard the terms “adjustable rate” and “fixed-rate mortgages.” Zion Mortgage is a fixed-rate mortgage lender in Texas, and we are happy to explain what we do in detail.
A fixed-rate mortgage is a home loan where the interest rate of the loan doesn’t change for the life of it. The interest rate is slightly higher than the rate on Treasury bonds at signing. The advantage in the fixed-rate mortgage is the rate won’t change no matter what. Even if the Treasury bond yields go up, the percentage rate on your mortgage will not. The most common fixed rate loans are either 15 or 30 years. Having a fixed rate is important in times of financial volatility when interest rates fluctuate. During a span of 30 years, a lot can happen.
How Fixed-Rate Mortgages Work
The interest rate on any loan is how much the lender is charging you. That interest rate determines how much money you will pay them back. Each monthly payment is equal to the interest rate multiplied by the principal, plus a small percentage of the principal itself. A bit of the principal is paid back every month, which makes the interest payment on the remaining principal a little less too. This results in a bit more of the payment each month going toward the principal. In the beginning, most of the monthly payment goes toward the interest. As you near the end of your mortgage term, more of the payment goes toward the principal. Contact the experienced team at Zion Mortgage today so we help you secure a home loan. We are a trusted fixed-rate mortgage lender in Texas.