Fixed Rate Mortgages

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

Payments on 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 than a 15 year fixed rate mortgage
• Interest rate does not go up
• Payment does not go up, it stays the same for 30 years

Drawbacks:

• Higher interest rate than a 15 year fixed rate mortgage
• Interest rate stays the same even if interest rates go down

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

Benefits:

• Lower interest rate
• Build equity faster
• If interest rates go up, yours is fixed

Drawbacks:

• Higher monthly payment stays the same if interest rates go down
• Interest rate stays the same even if interest rates go down