Fixed Rate Mortgage

With a fixed-rate mortgage, the interest rate does not change for the term of the loan, so the monthly payment remains the same. Typically, the shorter the loan period the more attractive the interest rate will be.

Payments made on a fixed-rate fully amortizing loans are calculated so that the loan is paid in full at the end of the term. In the early amortization period of the mortgage, a large percentage of the monthly payment pays the interest on the loan. As the mortgage is paid down, more of the monthly payment is applied toward the principal.

A 30-year fixed-rate mortgage is the most popular type of loan when borrowers are able to lock into a low rate.

Benefits:

  • Lower monthly payments compared to a 15-year fixed-rate mortgage.
  • Because you are locked in to a fixed rate, you don't need to worry about interest rates going up.
  • Your monthly payment remains the same for 30 years

Drawbacks:

  • Higher interest rate than a 15-year fixed-rate mortgage
  • Because you are locked into a fixed rate, even if interest rates go down, yours will remain the same

A 15-year fixed-rate mortgage allows you to pay off your loan quicker and lock into a lower interest rate.

Benefits:

  • Lower interest rate
  • You can build equity faster
  • Because you are locked in to a fixed rate, you don't need to worry about interest rates going up.

Drawbacks:

  • Higher monthly payment stays the same if interest rates go down
  • Because you are locked in to a fixed rate, even if interest rates go down, yours will remain the same.