Overview

Fixed rate mortgages are the most common type of mortgages available. Most consumers choose fixed rate mortgages because they provide certainty and stability. Fixed rate mortgages have interest rates that never change. Your monthly payment won’t change much either – because your principle and interest charges each month are steady, the only possible fluctuations are property tax and homeowners insurance.

Fixed rate mortgages are available in differing time periods – usually 30 years, 20 years, 15 years, or sometimes even 10 years. Other mortgages are classified as biweekly, and achieve slightly smaller periods by calling for half the monthly payment every two weeks. Since there are 52 weeks in the year, consumers end up paying for an equivalent of 13 months per year.

Fixed rate loans that fully amortize have two defining features – the rate remains fixed throughout the loan’s life, and payments are stable throughout the loans life. The payments are calculated to fully repay the loan at the end of the term. Fixed rate loans are usually structured to use a large portion of the early monthly payments to pay interest. Later on, the payments are applied more to principle than interest. In an average 30 year loan, half the principle is paid after 22.5 years.

Fixed rate mortgages, in the final picture, encompass a variety of loan types and variations, so long as these variations include a constant interest rate throughout the life of the loan. The fixed rate allows the certainty of knowing what your interest rate will be and not having to deal with the fluctuations of the market. If you are worried about interest rates going down a few years after committing to a long term fixed rate mortgage, refinancing is often available.