If you are like the majority of home buyers and homeowners in the United States, you’re likely interested in pursuing a fixed rate mortgage for your home financing needs. With fixed rate home loans, borrowers’ note rates remain consistent through the lives of their loans. Thus, borrowers can feel secure knowing that the monthly principal and interest portion of their mortgage payments will not fluctuate in an unpredictable market and will remain constant during the terms of your mortgages.
Fixed Rate Highlights & Benefits
- Fixed rate mortgages offers uniform payments throughout lives of the loans (does not apply to taxes, insurance, or other escrowed items).
- Consistent payment makes it easier to budget.
- Added security and stability from market flux.
- On fully amortizing fixed rate mortgage products, the amount of principal that is paid down grows each month – while the total principal and interest payment remains the same.
- Easier to understand than variable rate products.
Compare Today’s Mortgage Rates in Your Area
Research Popular Fixed Rate Products
- 30 Year Mortgage – The most popular type of home financing solution with US home buyers and homeowners. Note rate stays fixed for 360 months and repayment of principal and interest is amortized over 30 years. This long term repayment schedule helps keep mortgage payments lower than borrowers will find with short term home loan options. On the downside, borrowers will pay significantly more interest over the lives of their loans.
- 20 Year Mortgage – May be a good fit for people who are not interested in the higher interest owed with 30 year products but are not ready to commit to the payments associated with a 15 or 10 year mortgage. Some homeowners opt to refinance to a 20 year mortgage after they’ve been in their properties for a number of years as they realize just how little of their mortgage payments are applied to principal reduction over the first 10 years of their mortgages. Run an amortization schedule, it’s very eye opening.
- 15 Year Mortgage – The second mortgage popular fixed rate financing solution. While monthly payments can be significantly higher than someone would face with a 30 year mortgage, the amount of interest saved versus a 30 year mortgage can be in the thousands, if not tens or hundreds of thousands of dollars, depending upon the amount of the loan.
- 10 Year Mortgage – Can be a good fit for borrowers who can afford to pay off their mortgages in only 120 months. Shortest term fixed rate, conventional, conforming fixed rate solution that we’re aware of.
Low Down Payment Fixed Rate Home Loan Programs
- USDA mortgages – These 30 year fixed rate mortgages offer a zero money down home loan option for lower income home buyers in designated rural areas. Income and geographic restrictions may apply. Don’t let the name fool you, many communities qualify that don’t seem very rural.
- FHA loans – FHA mortgages are extremely popular with many first time home buyers as they allow for as little as 3.5% down (subject to change). FHA mortgages are available in both 30 and 15 year terms (also available as a 5/1 ARM).
- VA mortgages – 30 and 15 year fixed rate mortgages with possibility for zero money down. Only qualifying active duty military, veterans, and certain surviving spouses may qualify.
- Non conforming jumbo loans – Many lenders offer 30 and 15 year fixed rate jumbo loans in their arsenal. Jumbo loans are for higher loan amounts which exceed areas’ conforming loan limits. Rates are typically higher when compared to conforming products.
Why someone might want to consider an adjustable rate mortgage instead of a fixed rate product
Adjustable rate mortgages have low introductory rate periods which remain in place to a set number of years (typically 1, 3, 5, 7, or 10 years). If a home buyer or homeowner feels confident that they will sell or refinance their property within the introductory rate window (or shortly thereafter), then the short term savings of an ARM may be worthwhile. Borrowers might want to only consider adjustable rate products if they have significant equity, solid job security, and are in a stable or improving housing market. People get in trouble when they take out and ARM program and then cannot refinance without employment or adequate equity.