Fixed Rate Home Loan Irvine
Several mortgage products are readily available to homebuyers in the Irvine area. However, when looking at mortgage rates and loans, you can usually group things into two major mortgage categories: fixed-rate and adjustable-rate. How does a fixed rate home loan in Irvine work? Is it right for you?
Knowing the Difference
With an adjustable-rate mortgage (ARM), there are fluctuations in the interest rate based on the benchmark interest rate. This changes along with the market and what is known as a margin amount outlined in your home loan agreement.
When looking at a fixed rate mortgage (FRM), there is only one interest rate that will never change. Because of this, a fixed rate mortgage often appeals to the masses due to predictability and simplicity.
How Do Fixed Rate Mortgages Work?
If you are in the market for a fixed rate home loan in Irvine, you should know that they come with an unchanging interest rate, unlike an adjustable-rate option. After you sign on your loan agreement, you get to keep the same rate until you either pay off your loan or refinance it with a new loan. The mortgage gets paid off with fixed monthly interest taxes, principal, and insurance payments.
With a fixed rate mortgage, the lender works to calculate your amortization schedule in advance to build the interest into all your payments. The payment stays the same throughout amortization each month, but the amount that goes toward interest and principal differ.
Toward the beginning of your loan term, when the balance is larger, more of your payments go into the interest. However, as you work on continuous payments, there will be less of a principal balance to charge interest to. The result is payments that are eventually made up of more of your principal than interest.
Is a Short-Term, Fixed-Rate Loan Right for You?
No matter what, you want to take the time to look at current interest rates in 2021 before deciding on which route to take. A fixed rate mortgage will often come with terms that break down by 15, 20, or 30 years. You may also have the chance to get in on a 10yr mortgage, but this option is not very common.
For Irvine, California mortgage rates, the shorter your loan term, the higher your monthly payments are. However, you will end up paying the loan off faster. With that being said, a 30yr option is a very popular choice for cash-flow reasons. The mortgage rates for Irvine tend to be a bit higher with this option, but the monthly payment works out to be more affordable as the loan amount for repayment gets spread over a longer period.
As you research mortgage rates for Irvine, you will find that a fixed-rate loan is a good option for a homebuyer that wants predictable monthly payments. This is especially true if you can lock in a lower interest rate.
As you look for a fixed rate home loan in Irvine, do you have questions? Let the McLellan Team help! Give our team a call with any questions or get started on your loan application – (949) 669-1100.