November 17, 2022
A fixed-rate mortgage is a home loan option with a specific interest rate for the entire term of the loan. The interest rate on the mortgage will not change over the lifetime of the loan, and the interest and principal payments will remain the same each month.
With this type of mortgage, even fluctuations in the market will not impact the rate.
Fixed-rate home loans make up most of the mortgage industry for good reason. Consistent payments make budgeting easy.
A loan’s term refers to how long you’ll be paying it off. The most common loan terms are 30 years and 15 years.
For a 30-year fixed-rate loan, you will pay the balance over 30 years, which leads to a lower monthly principal and interest payment. A 15-year mortgage pays down the balance faster over a 15-year time period, which means the monthly principal and interest payment will be higher, but the loan will payoff sooner.
If you want to pay off your mortgage in 15 years but not commit to the 15-year fixed higher payment, you can pay extra on a 30-year fixed rate loan and potentially pay it off in 15 years.