Fixed-rate mortgages

Fixed-rate mortgages (FRMs) offer stable interest rates over an extended period of time. While specific terms vary widely, they typically last for fifteen or thirty years.

This type of mortgage is popular with homeowners because of their predictability. The interest rate will stay the same throughout the life of the loan, regardless of the market rate. That means that monthly payments will never increase.

People also value FRMs for their simplicity; the terms are generally straightforward and easy to understand. This can be especially important to first-time buyers, who aren’t familiar with financing jargon.

Because of the locked interest rate, timing can be extremely important to potential borrowers. If market rates are low, that low rate will be locked in. Obviously, then, it is ideal to obtain a fixed-rate mortgage when rates are low, whenever possible.

Once you have decided that a fixed-rate mortgage is your best option, your will have to decide how long you want the loan to last. If you can afford a higher monthly payment, you may want to go with a shorter term (fifteen years, in most cases). Such mortgages generally offer lower interest rates, and help buyers build up equity more quickly.

Many people opt for a longer term (usually thirty years). Such loans help decrease monthly payments, making the loan more affordable in the short term. Additionally, a longer term can help a buyer obtain a more expensive house than they could otherwise afford. On the downside, interest rates tend to be higher. Moreover, interest owed is going to pile up over time, making the total amount you pay far greater than if you went with a fifteen-year term.