This "traditional" type of loan maintains its original interest rate throughout the entire life of the loan. (Any change in monthly loan payments will be due to increases in other charges like insurance or taxes that will naturally occur over time.) Fluctuations in market rates, over the term of your loan, won’t have any impact on the amount of interest you pay because that rate is already "fixed." A Fixed Rate Mortgage loan may be a good choice if you:
- Want to increase the amount of loan you can qualify for
- Want the security of knowing what the amount of your mortgage payment will always be
- Plan to stay in this home for at least ten years
- If, in the coming years, you don’t expect your income to increase significantly
Fixed rate Mortgage Loans come in 10, 15, and 30-year terms. In determining the length of your loan, you may want to consider:
- Total amount of interest you want to pay over the course of your loan
- For example, the total cost of a 30-year loan is higher than the total cost of a 10 or 15-year loan. You are trading lower monthly payments for a greater number of monthly payments. (It takes about 22.5 years to pay off half the principal for a 30-year loan.)
- Your ability to make high monthly payments
- If you can afford to pay more per month, you reduce the number of months you have to pay. Also, choosing a 15-year term will save you thousands in interest charges vs. the typical 30 years.
Another option to shorten loan time and decrease the amount of interest you pay is to get a 30-year loan, so you don’t lock yourself into higher monthly payments, and pay "extra" each month towards the principal.
