Understanding Fixed- Rate Mortgages
What Is a Fixed-Rate Mortgage?
A fixed-rate mortgage is a home loan with an interest rate that stays the same. With a fixed-rate mortgage, you get:
Predictable monthly payments
To determine your payment amount, your loan total is divided by the number of months in your term, so your payment is the same each month.
Protection from future interest rate increases
You’ll pay the same amount at the end of your loan that you did at the beginning. You never have to worry about your interest rate getting higher, even when the market changes
Flexible term lengths
Term lengths for fixed-rate mortgages can range between 10 to 30 years, and you can choose which best fits your financial circumstances.
What Can a Fixed-Rate Mortgage Be Used For
What Can a Fixed-Rate Mortgage Be Used For?
Primary residence
Fixed-rate mortgages are great for people who are buying their first home or are looking to move to a new area.
Second home
Since your payment amount never changes, using a fixed-rate mortgage to purchase a second home makes keeping up with double loan payments easier.
Rental properties
Buying a rental property with a fixed-rate mortgage makes it simple to calculate the exact amount of rent to charge tenants each month.
Pros
- Stable monthly payments
- Interest rate stays the same
- Multiple term lengths available
- Straightforward qualification criteria
- Good for long-term financial planning
Cons
- Your repayment plan is a long-term commitment
- You may have higher initial payments than with an adjustable-rate mortgage
- Your interest stays the same even if market rates go down
Talk to our mortgage experts today about finding the right loan for you.
Alternatives to a Fixed-Rate Mortgage
- Interest-only mortgages let you pay only the interest at the beginning of the loan
- Principal payments start later
- These may also be refinanced after the payment amount goes up
- ARMs have an initial 5 to 10 year fixed-rate period
- Then, the interest rate can be adjusted to reflect market conditions
- You may be able to refinance to a different loan later on
- FHA loans backed by the Federal Housing Administration
- They offer competitive interest rates and flexible down payment requirements
- They can be used to buy multi-family homes with up to 4 units if the borrower lives in one of the units
How Do I Know If Down Payment Assistance Is Right for Me?
You want stability and predictability in your mortgage payments.
With a fixed-rate mortgage, your payment amount stays the same throughout the entire loan term.
You don't want to worry about whether interest rates will go up in the future.
Regardless of future economic conditions, a fixed-rate mortgage protects you from payment increases that could strain your budget.
You plan to stay in your home for an extended period of time.
Fixed-rate mortgages are great for owners who plan to stay in their homes long enough to accumulate equity.
When Is the Best Time to Use a Fixed-Rate Mortgage?
Get In Touch With a Loan Officer Today.
FAQ
Who is eligible for a fixed-rate mortgage?
How is my interest rate determined for a fixed-rate mortgage?
- Your credit score and history
- The current interest rate
- The amount of your loan
- How long your loan term is
- Your down payment amount
- Your overall financial profile
What happens if market interest rates decrease after I get a fixed-rate mortgage?
Are there prepayment penalties for a fixed-rate mortgage?
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