A fixed-rate mortgage keeps the interest rate and scheduled principal-and-interest payment stable over the loan term. Your total payment can still change when property taxes, homeowners insurance, or other applicable charges change. Read the official guidance.
Common types of fixed rate mortgages
The 15-year mortgage
For illustration only, a $100,000 loan at 4% would accrue less total interest over 15 years than over 30 years, assuming the same rate and no changes to scheduled payments. This is a hypothetical comparison, not an available rate or offer.
Your monthly payment will likely be higher. Even with the lower interest rate, you will probably have a slightly higher payment with a 15-year mortgage. This happens because you are paying more towards principal from the beginning. But, you will be mortgage-free in half the time, which is no small feat.
The 30-year mortgage
You will pay more in interest. Longer mortgage means more interest charged. This is how banks and other lenders make their money. They loan you, the borrower, money and collect their interest over the 15 or 30 years it takes you to pay them back.
Your monthly payment will likely be lower. Because you are spreading out your payments over a longer period of time, they will almost always be lower with a 30-year mortgage. If your monthly budget is tight, this may be a better way to go.
How it Works
- Monthly payments are based on interest rate, principal loan amount, and amortized interest over 30 years. With a Fixed Rate Mortgage, your interest rate will never change, even if market rates increase!
- The scheduled principal-and-interest payment remains stable; taxes, insurance, and other applicable charges may change.
- Your actual payment will vary based on your situation and the current interest rates when you apply.
- Check your Loan Estimate and loan terms for any prepayment penalty before making early or extra payments. Read the official guidance.
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