What Is a Fixed Rate Mortgage?
Fixed Rate Loans Overview
Fixed rate mortgage loans have an interest rate that will not change over the term of the loan for the original borrower. Fixed rate mortgages are one of the most common types of home loans available.
Types of Fixed Rate Mortgages
- Conventional loan
- Government backed FHA
- Government backed VA
- Government backed USDA
- New home or refinance
Why Choose a Fixed Rate Mortgage?
- Stability: Your interest rate will never increase over the life of a fixed-rate loan, even if the overall market rates go higher.
- Predictability: Your monthly mortgage principal and interest payments will never change over the life of the mortgage. A fixed-rate loan is a great advantage for budgeting.
- Lower Payments: Very low monthly payments are available on long-term Fixed Rate Mortgages.
- Tax Benefits: The interest you pay on your Fixed Rate Mortgage is tax-deductible1, providing an extra benefit at tax time.
- Options: You can find a fixed-rate loan with a down payment that works with your individual needs. Some loans offer options with as little as 3% down and up to 100% financing2
- Choice: 30, 25, 20, 15, and 10 year terms for your fixed-rate loan.
30-year vs. 15-year: The Two Most Common Fixed Rate Mortgage Loans
Each monthly mortgage payment includes a portion that is applied toward principal and another portion that is applies toward interest.3 Principal goes directly to pay off the loan, increasing the equity you have in your home. Interest is the cost of borrowing the money. As a general rule, at the beginning of a fixed-rate loan, a higher proportion of each monthly payment is applied toward interest, not principal. Over the course of the loan term, this will even out and then flip as a larger proportion from each monthly payment goes toward principal. This is an important consideration when deciding which Fixed Rate Mortgage term will be best for your individual circumstances.
30-Year Fixed Rate Mortgage
Considered a long-term mortgage, monthly payments are spread out over a longer timeframe, therefore offering some of the lowest monthly payments. However, with more payments over the term of the loan, more interest is paid out, too. A 30-year fixed-rate term is a great choice if you plan on staying in the home for a long period of time—at least seven to ten years. But even if a shorter stay is in your future, the low monthly payments can still make this a smart, practical choice. Just keep in mind that equity won’t build as fast.
15-Year Fixed Rate Mortgage
This is considered a short-term mortgage. You can expect the monthly payments to be somewhat higher because they’re not spread out as long. But because the term is shorter, you can save thousands of dollars in interest over the life of the loan. For the same reasons, a greater percentage of your monthly payments will go toward principal earlier on, and equity will increase much quicker. Basically, it costs less to borrow money for your home when the term is shorter. This is a great choice if you can afford the higher monthly payments in your monthly household budget.
Get Started with a Fixed Rate Mortgage
Mortgage Consultant Jeff Berman with PrimeLending can offer many options when it comes to fixed-rate loans. Whether you want to buy a new home or refinance contact Jeff Berman, The Mortgage Go To Guy, by calling 214-989-7700 or complete the form below. As one of the best mortgage consultants in DFW, he can advise you on the best fixed-rate loan to fit your needs.
1PrimeLending is not authorized to give tax advice. Please consult your tax adviser for tax advice for your specific situation.
2Additional conditions may apply. Please contact Jeff Berman for more details.
3Monthly payments for mortgages with an escrow account also apply payment to tax and insurance.