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Fixed-Rate Mortgages
A fixed-rate mortgage means the interest rate and principal payments remain the same for the entire life of the loan. (Taxes, of course, may change.)
Advantages: Consistent principal and interest payments make this loan stable your rate won’t change, so you don’t need to worry about market fluctuations. A good choice if you’re likely to stay in this house for a long time.
Disadvantages: May cost you more — these loans are usually priced higher than an adjustable-rate mortgage. Keep in mind that, on average, most people move or refinance within seven years. If rates in the current market are high, you’re likely to get a better price with an adjustable-rate loan.
Types of Fixed-Rate Mortgages
A 40 Year Fixed-Rate Mortgage offers consistent monthly payments for the entire 40 years you have the mortgage. So if the market is good, you can benefit from locking in a lower rate for the full term of the loan. The best choice if you're looking for a long-term, stable loan - for instance, if you're planning on staying in your house for some time. The longer term means that the monthly payment may be lower than a shorter term of 15, 20 or 30 years.
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A 30 Year Fixed-Rate Mortgage offers consistent monthly payments for the entire 30 years you have the mortgage. So if the market is good, you can benefit from locking in a lower rate for the full term of the loan. The best choice if you’re looking for a long-term, stable loan — for instance, if you’re planning on staying in your house for some time. |
A 20 Year Fixed-Rate Mortgage allows you to make a consistent monthly payment throughout the 20 years you have the mortgage. The shorter term means you pay the loan off more quickly, and therefore pay less interest. And you'll build equity faster than you would with a 30 year loan. (But remember the shorter term means higher payments, when compared to the 30 year fixed-rate mortgage.)
A 15 Year Fixed-Rate Mortgage means consistent monthly payments for all 15 years you have the mortgage. By building equity even more quickly than with a 30 year or 20 year loan, and paying less interest, you'll save money in the long run. It's an ideal option if you can handle the higher payments and if you'd like to have the loan paid off in a shorter period of time — for instance, if you plan to retire.
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