Fixed-rate Real Estate Loan in Key West

Most prospective buyers in Key West prefer a fixed-rate real estate loan because the interest rate cannot be increased during the term of the loan, typically 15, 20, or 30 years. Under a fixed-rate loan, buyers can feel more comfortable knowing the exact amount of their monthly loan payments throughout the life of the loan.

Although the interest rate does not change, the way in which the payment is divided changes over the loan period. At the beginning, most of the payment is applied to the interest owed to the lender. As the loan progresses, more money is applied to the principal, the face amount of the real estate loan. This also means that the amount of interest deductible for a federal income tax purposes will decline over the life of the loan.

The major difference between a fifteen-or twenty-year fixed-rate loan, on the one hand, and a thirty-year fixed-rate loan, on the other, is that the borrower will pay higher monthly payments on the shorter term loans than would be the case with a thirty-year loan for the same amount of money. Over the life of the loan, however, the real estate buyer pays far less interest, because he or she is using the money for a shorter period of time.