FIXED RATE MORTGAGES Fixed rate mortgages mean just what the name implies. The interest rate and therefore the payments are fixed for the life of the loan. No matter what happens in the future - whether interest rates go up or down - your interest rate and payments remain the same. This is why refinancing becomes so popular whenever interest rates drop significantly. People who are locked into fixed rate loans at higher interest rates pay off those loans and take out new fixed rate or adjustable rate loans at a lower interest rate to save money. Fixed rate mortgages traditionally carry a slightly higher interest rate than adjustable rate mortgages, because the lender is locked in to that interest rate, no matter what happens in the future, even if inflation drives interest rates sky high. For example, here is a typical comparison between a 30 year fixed rate loan and a 1 year  adjsutable rate loan, where the rate is fixed for one year and then adjusts for inflation: 30 year fixed rate loan: PRODUCT 30 Year Fixed RATE     POINTS       APR 5.43%    0.25              5.55% PRODUCT 1/1 Arm RATE     POINTS       APR 3.93%     0.35             5.30% The 30 year Fixed-rate loan has an interest rate 0f 5.43%, a loan fee of one quarter point or one quarter of one percent of the loan amount ($250 for each $100,000 borrowed) and an Annual Percentage rate of 5,5% when you add in the fees The 1 year Adjustable loan, on the other hand, starts at an interest rate of only 3.93% The points are slightly higher 0,35% of the loan amount, or $350 for each $100,000 borrowed, but even so, the Annual Percentage Rate comes out slightly lower at  5.30%. But, that is just for the First Year and after that, the rate will probably go up. The stability - knowing that their payment is fixed and can never go up in the future - makes the slightly higher interest rate worth it for people who intend to stay in their property for many years and don't want to have to worry about their payments going up in the future, but those who wind up selling after just a few years pay a needless premium. Yet many people still don't really feel comfortable with adjustable loans. This is why the mortgage industry has come up with several variations on the fixed rate loan. Now, you czan get loans where the rates are fixed for anywhere from one to ten years, amortized on a 30 year schedule and then at the end of the loan term, they either switch to an adjustable rate for the remainder of the loan term, or else the entire principal amount is due in one lump sum "balloon" payment, which mean that you either have to sell the property or refinance it to pay off the loan. PRODUCT 3/1 Arm RATE     POINTS       APR 4.47%    0.29             4.99% PRODUCT 5/1 Arm RATE     POINTS       APR 4.72%    0.29              4.96% PRODUCT   5 Year Balloon RATE     POINTS         APR 4.90%        0.53            5.75% PRODUCT  7 Year Balloon RATE     POINTS       APR 5.12%      0.48             5.73 As you can see, all of these alternatives offer a slightly lower interest rate than the 30 year fixed loan. This makes good sense if you don't really expect to stay in the property for 30 years, but you do expect to stay long enough so that you want the stability of fixed payments, rather than an Adjustable Rate Mortgage. MORTGAGE MAGIC HOME  PAGE CONTRACT WIZARD HOME PAGE TAX SALE RICHES HOME PAGE