Fixed-Rate Mortgage Loans
Do you like knowing how much your mortgage payment will be each month? Want the option of paying off your mortgage early with no penalties? A fixed-rate mortgage might be for you.
With a fixed-rate mortgage, the interest rate on your home loan stays the same forever. Once locked in, the interest rate will not fluctuate with market conditions.
Fixed-rate loans are popular with homebuyers who plan on having their home for a while and also with those who want predictability in their budget. The terms go up to 30 years, with 10, 15, 20 and 30-year increments being most common.
With a 15-year fixed-rate mortgage you’ll usually get a lower interest rate, and pay much less interest over the life of your loan, but you’ll have a significantly higher monthly payment than with the 30-year mortgage. A 30-year might be a better option if lower payments are a better for your budget, but you’ll be building equity in your home at half the rate you would with a 15-year term.
Predictability
An adjustable-rate mortgage may give a low introductory rate, but predictability is the big plus of a fixed-rate loan. You know exactly how much interest you will pay over the term of the loan, and you’re protected in the event interest rates rise.
Deductibility
In the early years, a fixed-rate mortgage consists primarily of tax-deductible interest.
Comparability
Stable rates and payments make it easier to compare loan options from different lenders.
Downside
With a fixed-rate mortgage, you wouldn’t be able to take advantage of falling interest rates without refinancing.
