These are mortgages with a fixed interest rate over the life of the loan. You might consider this if you:
- Plan on living in your new home for many years, and/or
- Prefer the stability of knowing how much your payment will be each month. Since most home loans are for a period of 30 years, if you want a payment you can count on for that long of a period of time, a fixed rate mortgage may be the best choice for you. Once your loan amount and interest rate are locked in, a fixed rate mortgage will guarantee that you will have the same payment over the entire life of the loan. This can be a great choice when interest rates are low, as you protect yourself from future rate increases. However, if interest rates are high at the time you take out a fixed rate mortgage, you’ll be stuck with that high interest for the life of the loan. You can, of course, choose to look into re-financing.
- This is most common choice for first-time homebuyers. It is also the easiest loan to qualify for.
- Monthly payments are lower than for 15-year and 20-year loans.
- For income tax purposes, this term provides the maximum interest deduction.
- Because repayment is spread over a full 30 year span, the monthly payments are lower than most other loans.
This is similar to a 30-year fixed, only you pay off the loan in half the time.
- The advantage to this is that you build up equity and own the home free and clear faster.
- The potential disadvantage is that your rates on a 15 year fixed will likely be higher. Thus, the 15 year could be a riskier loan for clients worried about their ability to pay their monthly rate or their job security.