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A Fixed Rate Means Fixed Payments

Benefits of a Fixed Rate Mortgage

A fixed rate mortgage loan is the most popular choice for homeowners … with good reason:

  • Your payment doesn’t change for the life of the loan
  • Choose a 10 to 40 year term based on your needs and budget
  • A 30-year term is most popular for its combination of low rate and payment, allowing you to afford more home
  • Spread the cost of interest over the life of the loan
  • Refinance up to 97% of your primary home’s value
  • Buy your primary home with as little as 3% down
  • Pay down your mortgage any time without prepayment penalty

How does a Fixed Rate Mortgage Work?

When you get a fixed rate loan to buy or refinance your home, you’ll make monthly payments based on the interest rate and original loan amount.

A portion of each monthly payment is applied toward the principle balance and a portion toward the interest.  At the beginning of the loan term, most of your payment is applied to interest.  As time goes, the portion applied toward principle gradually increases.  Near the end of the term, most of your payment is applied to the principle balance.

To pay your loan off faster, you can pay more than the minimum required.  The difference in your payment is applied to the principle, reducing your balance faster, and reducing the interest you pay over the life of the loan.

The shorter the term, the less you pay in interest over the life of the loan.  For example, you’ll pay more interest with a 30-year fixed rate mortgage than you will with a 15-year fixed because interest is accruing over a longer period of time and, generally, at a higher rate.

However, while the interest rate and total amount of interest you pay will be higher on a 30-year fixed, your payments will generally be much lower than a 15-year fixed because your paying it back over those extra years.

Depending on the size of your down payment (if you’re buying a home) or the amount of equity you have (if you’re refinancing), your loan may require mortgage insurance.

15-Year Fixed vs. 30-Year Fixed

The sample comparison below illustrates the difference in monthly payments and total interest over the life of the loan.  Which is right for you?

Loan Type 30-Year Fixed 15-Year Fixed
Loan Amount $600,000 $600,000
Rate/APR 6.00% 5.25%
Monthly P&I Payment $3,597 $4,823
Total Interest Cost $695,225 $268,213

We’re here to help. So if you’re not sure if this type of loan is right for you, call us at (888) 273-8734 or schedule a free consultation.


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