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Fixed-rate mortgages

The most common mortgage type is fixed-rate mortgages, which feature fixed mortgage rates and monthly payments. While there are mortgages available for various time periods, the most usual are 15-year and 30-year fixed rate mortgages.

Fixed-year mortgages are popular because a lot of consumer prefer stability in their monthly payments and do not appreciate constantly rising and falling rates. In times of low mortgage rates on the market, fixed-rate mortgages are an affordable option.

There are many advantages and disadvantages to consider when taking a 15-year or 30-year fixed rate mortgage loans.

Getting a 30-year fixed rate gives you the chance to get a long-term loan without having to worry about fluctuations in the interest rates or payments. Also, the monthly payments are lower compared to the 15-year loans, because the interest is amortized over a longer time period. Because of the lower monthly payments, borrowers can use this money in a variety of ways, including investing more in their homes. Moreover, the higher interest bill increases the amount consumers can deduct at tax time.

The downsides of a 30-year fixed rate mortgage are the slow pace of building equity and the higher overall interest bills, because of the long amortization term.

On the other hand, a 15-year fixed rate mortgage has a much faster pace of building home equity and dramatically lower interest bills.

Borrowers who take a 15-year fixed rate mortgage, however, face significantly higher monthly payments. Also, 15-year fixed rate mortgages tend to be smaller and restricted to smaller homes: lenders usually require a more long-term commitment (20, 25, 30 year fixed) from the borrowers who desire larger homes.