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 the security of knowing your interest rate will not change, nor will your monthly payment, unless property tax and insurance amounts change
- Plan to stay in this home for several years
- You don't expect your income to increase significantly in the coming years
Fixed Rate Mortgage loans come in various terms such as 10, 15, or 30 years. 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 in terms of the interest paid on the loan is higher than the total cost of a 10 or 15-year loan. With a 30-year loan, you have the advantage of lower monthly payments due to the longer loan term.
- With a 15-year loan, you have the advantage of repaying the loan more quickly with higher monthly loan payments.
- Your ability to make high monthly payment
- 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-year term
Another option to decrease the amount of interest you pay is to get a 30-year loan, so you don't lock yourself into higher monthly payments, but pay a little "extra" each month towards the principal when you are able to do so.
10 Year Fixed
| Best Choice If:Seeking flat monthly principal and interest payment for the duration of the loan with lowest fixed rate available. | Advantages:Low fixed rate. Shorter term results in faster balance reduction than longer term loans. | Disadvantages:Higher required payments than longer term loans. |
15 Year Fixed
| Best Choice If:Seeking flat monthly payments for the duration of the loan. | Advantages:Low fixed rate. Shorter term results in lower interest rate and faster balance reduction than longer term loans. | Disadvantages:Shorter term results in higher payment amounts compared to longer term loans. |
15 Year Fixed - 100%
| Best Choice If:Seeking fixed rate loan that minimizes or eliminates out of pocket costs. | Advantages:No down payment required. Fixed rate for entire loan. | Disadvantages:Higher payment than longer term options. |
First Time Home Buyer
| Best Choice If:Seeking low down payment option to reduce out of pocket expenses. Flat monthly payments for the duration of the loan. | Advantages:Low down payment option with fixed rate for 30 years and lower closing costs. No max income limits and no home buyer education course required. | Disadvantages:At least one borrower must be a first time home buyer as defined by not having already owned a home within the last three years. |
30 Year Fixed
| Best Choice If:Seeking a combination of low payment and fixed rate over life of loan. | Advantages:Fixed rate over 30 years provides a low monthly payment. | Disadvantages:Higher interest rate and closing costs than available for some other loan options. Requires 5% minimum down payment. |
30 Year Fixed - No Origination Fee
| Best Choice If:Seeking long term fixed rate without the standard 1% Origination Fee. | Advantages:Fixed rate over 30 years provides a low monthly payment with reduced closing costs. | Disadvantages:Higher interest rate than available on some other loan options. Requires minimum 5% down payment. |
