What is a Fixed-Rate Mortgage?

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A fixed-rate mortgage is the most popular kind of loan for home buyers. Because of its fixed-rate stability, it isn’t affected by indexes, margins, or caps in the way that a variable rate mortgage is. A fixed rate mortgage is stable. And when you’re taking on something as big as buying a house, stability is a good route to choose. For instance, your monthly principal and interest payment will remain the same through your mortgage repayment schedule.

For borrowers, the fixed-rate mortgage is popular because of its ease and simplicity. It’s designed for people who want a straightforward and predictable home loan. If you're the type who doesn't want to take a risk with your residence or your finances, a fixed-rate mortgage is ideal.

With a fixed-rate mortgage, homebuyers can secure a low interest rate for up to 30 years, making it easy to plan ahead and even add on additional payments (the amortization process) to pay down the loan faster.

What Are the Term Options for a Fixed-Rate Mortgage?

While the fixed-rate mortgage is not attainable for everyone, its main benefit is that the interest rate, principal, and resulting interest payment does not increase.

The most common type of fixed-rate financing is for a 30-year term loan. This option may make monthly payments manageable because it spreads out principal payments over three decades.

Other fixed rate options are available for a 15-year term. There are also 10-year or 20-year options and lenders will adjust your loan terms if asked.

Fixed-Rate Mortgage Advantages

  • The same monthly principal and interest payments allow you to make financial plans without unexpected surprises like rising interest rates and payments.

  • You are protected from unforeseen mortgage payments for the duration of the loan, regardless of what happens to interest rates.

  • It is the ideal loan if you plan to stay at your residence for many years.

Details About the Fixed-Rate Mortgage

A fixed rate loan is one where the rate is permanent. It does not change. If you choose a 30-year fixed rate mortgage at 3.5% percent, that is the interest rate that will remain for the entire loan term.

The 15 and 30-year fixed-rate mortgage are the most common kinds of home loan for residential real estate purchases.

The shorter your fixed-rate mortgage terms are the lower your mortgage rate. So, if you ask for a 10-year fixed rate mortgage, rates will be lower than if you chose a 30-year fixed rate mortgage. This is because you pay much less interest on a fixed rate mortgage over 10 years than one with 30.

While the fixed-rate mortgage may be difficult to qualify for, it is one of the most widely used home loans in the country. If you do not qualify for a fixed-rate mortgage, your real estate agent can give you tips on how you can get approved. Improving your credit score, increasing your savings, and creating a healthier financial background can increase your odds.

If you’d like more information on fixed-rate mortgages, please fill out the form below and a home.loans specialist will get in touch with you.