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Can interest on a 30-year mortgage be changed?
If you take out a mortgage at today's rate, which is very cheap by any standard, lock it in for 30 years, and the interest rates starts skyrocketing in a year or two - can my mortgage be changed? In other words, if I pay 5% mortgage, and the general interest rates go up to, oh, let's say, 12% - surely my mortgage company will not honor the 5% I signed up for? Or will they? And if they won't - how come they say it's a fixed interest mortgage? I mean, it sounds very odd that the mortgage companies will continue subsidizing such low mortgages? Does anyone know? I'm not very savvy about these things ... :(
5 Answers
- Net Advisor™Lv 71 decade agoFavorite Answer
If you lock in a mortgage of any term with a fixed rate, it is fixed for the term you locked in.
Thus a 30 year fixed mortgage is fixed at whatever rate was locked at that time.
If you lock in a 5% mortgage for 30 years and rates go to 600% (for extreme example) you are still paying 5%.
Just make sure that you pay on time. Look for clauses in the mortgage of any late payment or default interest rate. Look at the contract. Have a real estate attorney review it for you if you have legal questions.
- Anonymous1 decade ago
As told, a fixed rate can not go up. On the first 15 years on a 30 year mortgage, you pay about 70% in interest. That's how most banks make their money. If you can $50 extra each month, that would cut down on the interest owed as well as the term of the loan. Call your mortgage co and request an amortization. That will give a complete break down on interest/principal. There is also no grace period on a mortgage. If you pay it 5 days later, you are charged additional interest till paid. It's called per-diem
Source(s): Retired bill collector 35 years - 1 decade ago
If you have a fixed rate mortgage, then your rate will not change for the life of the loan. For example, if you get a 500,000 loan at 5% fixed for 30 years, your rate will be 5% for the life of the loan. The banks can't change it unless you agree (which is what happens with loan modifications that you've been hearing about). Adjustable rate mortgages generally have a lower rate at the beginning for a fixed period of time (I've seen from 1 to 7 years) and then adjust according to what the then-current rate is.
In fixed rate, the banks aren't subsidizing the mortgages. Very simply, when you get a mortgage, the banks borrow the whole sum at a lower rate (this is one of the rates that the Federal Reserve controls), so the rate that they pay doesn't change over time either.
- Ryan MLv 71 decade ago
The ONLY way an interest rate can be changed on a "fixed" rate mortgage is if YOU refinance. Even if the rates go up to 200000%, you are locked in at the rate when you signed. Likewise, rates in the early 1980's were well over 20%. If the home buyer did not refinance when rates dropped, then they were still going to pay 20%. Fixed means fixed.
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- STEVEN FLv 71 decade ago
If you sign a FIXED rate mortgage, they are LEGALLY bound to keep that rate for the FULL term. This is actually why adjustable rate mortgages were invented. They protect the BANK from rising interest rates. They START at lower rates because no sane borrower will even LOOK at an adjustable rate without a discount. Given the ability to refinance is rates drop, a fixed rate is ALWAYS better for the borrower.
