The most common and popular mortgage product around is the fixed rate mortgage or FRM. In this arrangement, the monthly principal and interest payments remain the same during the whole term of the loan. FRMs can run from 15, 20, 30, even 40- year terms.
One of the main benefits of FRMs is that it provides protection from inflation since your interest rate does not change. It also allows you to plan for the future since you will be factoring in the same monthly payments in your budget from the start to the end of your loan.
The main disadvantage of FRMs is that you can’t take advantage of lower payments when the interest rates do drop. You will have to refinance first before you can do so and refinancing also has its own share of fees which may be more than the payments you will make with lower interest rates.
Compared to an adjustable rate mortgage or ARM, you also have to pay more initially which can prevent you from getting a higher loan for a more expensive house that you have always wanted.
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