Fixed Rate Mortgage
A fixed rate mortgage has the same payment for the entire term of the loan. A fixed rate mortgage is a mortgage where your interest rate does not change, and your monthly payment does not change. The opposite of a fixed rate mortgage is is an adjustable rate mortgage.
There are two main types of fixed rate mortgages:
- 30 year fixed rate mortgage
- 15 year fixed rate mortgage
30 Year Fixed Rate Mortgage
With a 30 year fixed rate mortgage, your interest rate does not change, your payment does not change, and you pay the loan off in 30 years. Traditionally, this has been the most popular mortgage when interest rates are low because you can lock in and secure a low interest rate.
Advantages
- Lower monthly payments than a 15 year fixed rate mortgage
- Interest rate does not go up if interest rates go up
- Payment does not go up, it stays the same for 30 years
Disadvantages
- Pay a higher interest rate than a 15 year fixed rate mortgage
- Interest rate stays the same if interest rates go down
15 Year Fixed Rate Mortgage
With a 15 year fixed rate mortgage, your interest rate does not change, your payment does not change, and you pay the loan off in 15 years. This hast been popular among people who are refinancing their 30 year loan.
Advantages
- Lower interest rate than a 30 year fixed rate mortgage
- Build up equity in your home faster than with a 30 year loan
- Interest rate does not go up if interest rates go up
- Payment does not go up, it stays the same for 15 years
Disadvantages
- Higher monthly payment than a 30 year fixed rate mortgage