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With a fixed rate mortgage, the
interest rate does not change for the term of the loan, so
the monthly payment is always the same. Typically, the
shorter the loan period, the more attractive the interest
rate will be.
Payments on fixed-rate fully
amortizing loans are calculated so that the loan is paid in
full at the end of the term. In the early amortization
period of the mortgage, a large percentage of the monthly
payment pays the interest on the loan. As the mortgage is
paid down, more of the monthly payment is applied toward the
principal.
A 30 year fixed rate mortgage is
the most popular type of loan when borrowers are able to
lock into a low rate.
Benefits:
• 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
Drawbacks:
• Higher interest rate than a 15 year fixed rate mortgage
• Interest rate stays the same even if interest rates go
down
A 15 year fixed rate mortgage
allows you to pay off your loan quicker and lock into an
attractive lower interest rate.
Benefits:
• Lower interest rate
• Build equity faster
• If interest rates go up, yours is fixed
Drawbacks:
• Higher monthly payment stays the same if interest rates go
down
• Interest rate stays the same even if interest rates go
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