Beat Mortgage

Fixed Rate Mortagage

July 20th, 2007

The fixed rate mortgage – FRM is the general type of mortgage loan wherein the rate of interest on the loan amount remains fixed through out the loan tenure. The other mortgage type is floating rate mortgage wherein the rate of interest fluctuates as and when the economy demands. Besides, these there are some other types of mortgage loans also, such as interest only mortgage, graduate payment mortgage, adjustable rate mortgage, negative amortization mortgage and balloon payment mortgage.

Fixed rate mortgages are distinguished by their interest rate which includes the compounding frequency, amount of loan and term or period of the mortgage. Based on these three values, the monthly repayment of the mortgage loan is generally calculated. All the fixed rate mortgages have theinterest rates attached to the index. Several usual indexes in the United States include: 11th District Cost of Funds Index–COFI; 12-month Treasury Average Index–MTA; Constant MaturityTreasury–CMT and National Average Contact Mortgage Rate.

However, in some countries, the banks publish the Prime Lending Rate-PLR which is used as the index, and the index is thereafter generated as the rate plus little margin. For applying the index on a rate plus margin basis could mean that the rate of interest would equal the basic index plus the margin. The margin is mentioned in the agreement note. Fixed Rate Mortgage is the common most type of mortgage laons prevailing in the United States.

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