Fixed-Rate Mortgages

What is a fixed-rate mortgage?

A fixed-rate mortgage has the same interest rate for the life of the loan. Most people choose a fixed-rate loan for their mortgage because it protects them from the sudden jump in interest rates that they might experience with an adjustable-rate loan. They're a good option for a first-time home buyer who is using a conventional loan because the fixed interest rate is more stable than an adjustable rate. In fact, many people choose to refinance their adjustable rate mortgage into a fixed-rate one before their interest rate adjusts upward.

What terms are available?

You can get a fixed-rate loan that lasts 30 years, 15 years, or 20 years. The main difference is your interest rate and monthly payment amount. You'll usually pay a lower monthly payment but a higher interest rate for a longer loan term. Most people choose a 30 year or 15 year term.

Advantages of a fixed-rate mortgage

A fixed rate mortgage's biggest advantage is stability. Other advantages are:

  • If interest rates increase, your mortgage won't be affected.
  • You'll know what to expect from your mortgage payment, making budgeting and planning easier. 
  • You can refinance this type of loan if rates go down

Disadvantages of a fixed-rate mortgage

  • If interest rates drop throughout the term of your mortgage you won't benefit unless you refinance.
  • They can be more expensive than an adjustable rate mortgage (ARM)

Is it right for you?

Fixed-rate mortgages are a good option for people who:

  • are buying their first home
  • can't commit to watching the markets to judge the impact on their ARM
  • are looking for stability in their mortgage payments

How would a fixed-rate mortgage affect your loan? Check out the estimated mortgage rates for a fixed vs. ARM loan and then calculate your monthly payments