Fixed-rate mortgages

With a fixed-rate mortgage, the interest rate does not change for the loan term, so the monthly payment is always the same. Typically, the shorter the loan period, the more attractive the interest rate will be.

Payments on fixed-rate fully amortizing loans are calculated so that the loan is paid in full at the end of the term. In the early amortization period of the mortgage, a large percentage of the monthly payment pays the interest on the loan. As the mortgage is paid down, more of the monthly payment is applied toward the principal.

30-year fixed rate

A 30-year fixed-rate mortgage is the most popular type of loan when borrowers can lock into a low rate.

Benefits:

Lower monthly payments than a 15-year fixed rate mortgage
The interest rate does not go up if interest rates go up
Payment does not go up; it stays the same for 30 years

Drawbacks:

Higher interest rate than a 15-year fixed rate mortgage
The interest rate stays the same even if interest rates go down

15-year fixed rate

A 15-year fixed rate mortgage allows you to pay off your loan quicker and lock into an attractive lower interest rate.