A fixed-rate mortgage keeps the same interest rate, and the same principal-and-interest payment, for the entire life of the loan. Taxes and insurance can still change; the loan payment itself does not.
Terms
Fixed-rate loans are commonly offered in 30-, 20-, 15- and 10-year terms. A 30-year term gives the lowest monthly payment for a given loan amount. A shorter term carries a higher payment but a lower rate and far less total interest.
Advantages
- Predictable payments for budgeting, for as long as you keep the loan.
- No exposure to future rate increases.
- Available on conventional, FHA, VA, USDA and jumbo programs.
Trade-offs
- The start rate is usually higher than the introductory rate on an adjustable-rate mortgage.
- If rates fall, you keep your rate unless you refinance, which has its own costs.