Fixed-rate mortgage
Okay kiddo, so think of a fixed-rate mortgage like getting a super special piggy bank to save up all the money you need to buy a house.
Here’s how it works:
Let’s say you want to buy a house that costs $100,000. You don’t have all that money right now, so you borrow it from a bank. The bank gives you the $100,000, but you have to pay them back over a long time, called a “term”.
Now, when you borrow that money, the bank can decide to make you pay different amounts of money each month, depending on how much interest they want to charge you. Think of interest like a “rental fee” you have to pay the bank for borrowing the money.
BUT...with a fixed-rate mortgage, the bank agrees to charge you the SAME amount of interest every month for the whole time you’re paying them back. So, if the bank says they’ll charge you 4% interest, that’s what you’ll pay every single month for the whole term of your loan (usually 15 or 30 years).
That may not always be the lowest or the highest interest rate you could get, but it’s good to know that your monthly payments won’t change. So, even if the economy changes or interest rates go up or down, you’ll still pay the same amount every month. It’s like knowing you’ll get the same allowance every week, no matter what happens.
And the best part? Once you make all of your payments, the house is all yours! No more payments needed, unless you want to borrow more money later on for home repairs, remodeling or maybe even to buy another piggy bank or to save for college.
So there you have it, a fixed-rate mortgage is like your very own piggy bank to buy a house, with the same simple payment every month until it’s all paid off.
Here’s how it works:
Let’s say you want to buy a house that costs $100,000. You don’t have all that money right now, so you borrow it from a bank. The bank gives you the $100,000, but you have to pay them back over a long time, called a “term”.
Now, when you borrow that money, the bank can decide to make you pay different amounts of money each month, depending on how much interest they want to charge you. Think of interest like a “rental fee” you have to pay the bank for borrowing the money.
BUT...with a fixed-rate mortgage, the bank agrees to charge you the SAME amount of interest every month for the whole time you’re paying them back. So, if the bank says they’ll charge you 4% interest, that’s what you’ll pay every single month for the whole term of your loan (usually 15 or 30 years).
That may not always be the lowest or the highest interest rate you could get, but it’s good to know that your monthly payments won’t change. So, even if the economy changes or interest rates go up or down, you’ll still pay the same amount every month. It’s like knowing you’ll get the same allowance every week, no matter what happens.
And the best part? Once you make all of your payments, the house is all yours! No more payments needed, unless you want to borrow more money later on for home repairs, remodeling or maybe even to buy another piggy bank or to save for college.
So there you have it, a fixed-rate mortgage is like your very own piggy bank to buy a house, with the same simple payment every month until it’s all paid off.
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