Fixed Rate Mortgage


A fixed rate mortgage has a "fixed", unchanging interest rate and payment amount for the life of the loan. A fixed rate mortgage is a good option if you do not like to take risks and plan on staying in your home for a longer period of time.

A fixed rate mortgage enables you to predict your monthly expenses and avoid the possible influx of interest rates that can occur with adjustable rate mortgages. A fixed rate mortgage is available for owner occupied, second homes, and investment properties. These loans typically do not carry pre-payment penalties.

A typical fixed rate mortgage term is 30 years, 20 years, 15 years, and 10 years. With any type of fixed rate mortgage, early in the loan the majority of the payment is applied to interest. As the balance of the loan is paid down, more of the payment goes toward the principal portion of the loan. 15 and 10 year fixed rate mortgages are great loans if you can handle making a higher payment and would like to have the loan paid off faster-for example, if you are retiring. Also with a shorter term loan (15 or 10 year fixed rate mortgage), you not only pay the loan off quicker, but will pay less interest as well. This also enables you to build equity in your home at a quicker rate.

You may pay a little more (in the form of a higher interest rate) for a fixed rate mortgage, but the resulting security and peace of mind may be worth it.

Advantages Of A Fixed Rate Mortgage
  • Fixed, guaranteed interest rate for the life of the loan
  • Fixed, stable monthly payments so it is easier to plan monthly finances
  • Good mortgage if you are planning on staying in your home for a longer period of time
  • Available for owner occupied, second homes, investment properties
  • Typically no prepayment penalties
  • Shorter term fixed mortgages allow you to build equity and pay off the loan faster
Disadvantages Of A Fixed Rate Mortgage
  • May pay a higher premium (interest rate) than with an adjustable rate mortgage introductory rate
  • Monthly payments may be higher than with adjustable rate monthly payments
  • May not be the best mortgage if you are planning on moving in 3-5 years because will pay a higher interest rate
  • May not be eligible for as large a loan amount as with an adjustable rate mortgage because of higher interest and payments
Types of Fixed Rate Mortgages