What is a Fixed Mortgage Rate?
A fixed rate mortgage offers a straightforward, predictable monthly payment. With fixed-rate mortgages, your interest rate and your total monthly payment of principal and interest will stay the same for the entire term of the loan. That predictability makes it easier to set your budget.
30 Year Fixed-Rate Mortgage
The 30-year fixed-rate mortgage is one of the most popular mortgages. Many people like the fixed interest rate and lower monthly payments. But since the term of the loan is long, you’ll pay more interest over the life of the loan than you would on a shorter-term mortgage, and you’ll build equity more slowly.
20 Year Fixed-Rate Mortgage
A 20-year fixed-rate mortgage helps you pay off your home faster and build equity more quickly than longer-term fixed-rate mortgages. A 20-year fixed-rate mortgage generally has a lower interest rate than longer-term home loans but higher monthly payments.
15 Year Fixed-Rate Mortgage
You generally pay a lower interest rate with a 15-year fixed-rate mortgage than you would for longer-term fixed-rate mortgage loans. You will pay less interest than you would with a longer-term loan and build equity more quickly. However, your monthly payments will be higher for a 15-year fixed-rate mortgage than they would be on a longer-term mortgage.
How Length of Rates Affect Interest & Equity
In general, the longer the term of the fixed-rate mortgage is the more interest you will pay over the life of the loan and the higher your interest rate will be, but your monthly payments will be lower. The shorter the repayment term is, the lower the interest rate will be and the faster you’ll pay off and build equity in your home, though your monthly payments will generally be higher.
Fixed-rate mortgage loans are available in a variety of repayment terms, with 30-, 20- and 15-year fixed-rate mortgages being the most popular.