Plan your budget with a consistent mortgage payment at a low rate that will stay the same through the life of your loan.
Common types of fixed rate mortgages
The 15-year mortgage
You will pay less in interest. If you borrow $100,000 to purchase a home at a 4% interest rate, paying over a longer period of time will mean more interest on the money borrowed. So, a 15-year mortgage can significantly cut down on the interest that you pay. Add to that the lower interest rates that are often available for 15-year mortgages and you could have some big savings available.
Your monthly payment will likely be higher. Even with the lower interest rate, you will probably have a slightly higher payment with a 15-year mortgage. This happens because you are paying more towards principal from the beginning. But, you will be mortgage-free in half the time, which is no small feat.
The 30-year mortgage
You will pay more in interest. Longer mortgage means more interest charged. This is how banks and other lenders make their money. They loan you, the borrower, money and collect their interest over the 15 or 30 years it takes you to pay them back.
Your monthly payment will likely be lower. Because you are spreading out your payments over a longer period of time, they will almost always be lower with a 30-year mortgage. If your monthly budget is tight, this may be a better way to go.
How it Works
- Monthly payments are based on interest rate, principal loan amount, and amortized interest over 30 years. With a Fixed Rate Mortgage, your interest rate will never change, even if market rates increase!
- Your payment will not change throughout the life of the loan.
- Your actual payment will vary based on your situation and the current interest rates when you apply.
- Pay your mortgage off at any time without pre-payment penalties.
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Frequently Asked Questions
What is a fixed rate mortgage?
A fixed rate mortgage is a home loan where the interest rate stays the same for the entire term, meaning your principal and interest payments remain consistent each month.
What loan terms are available for fixed rate mortgages?
Fixed rate mortgages typically come in 30-, 20-, or 15-year terms. Shorter terms generally have higher monthly payments but allow you to pay off your home faster and build equity sooner.
What are the main advantages of a fixed rate mortgage?
The biggest advantage is stability. Your monthly payment doesn’t change due to market fluctuations, making it easier to plan your budget with confidence over the long term.
How does a fixed rate mortgage differ from an adjustable rate mortgage?
A fixed rate mortgage has an interest rate that remains the same throughout the loan, while an adjustable rate mortgage (ARM) may have a rate that changes periodically based on market conditions.
Who is a fixed rate mortgage best suited for?
It may be a good option for homebuyers who plan to stay in their home for several years and want predictable monthly payments without worrying about future rate adjustments.
