Fixed Rate Mortgages

Borrowers prefer fixed-rate mortgages because they know in advance what their interest rates and payments will be over the life of the loan. Fixed-rate mortgages are usually available for 15-year, 20-year, 30-year, and 40-year terms.

Fixed-rate Mortgage Benefits

A hedge against inflation – Interest rates rise during inflationary cycles. But if you have a fixed-rate mortgage, your interest rate will not change. If you plan to remain in your home for 5 years or longer, this is a real benefit.

Better fiscal planning – Because you will never be caught off guard by an unexpected increase in your payments, you are in a better position to plan for other financial events such as raising a family, paying for college, and retirement.

Reduced risk – Fixed payments reduce the risk of having to sell or walk away from your home because of changes in the real estate or mortgage market. Fixed-rate mortgages are particularly popular with first-time buyers for this reason.
One of the few downsides of a fixed-rate mortgage is that your interest rate and payments will not go down if mortgage rates fall. Of course, you can always consider refinancing if that occurs.

Another potential negative is that some people have trouble qualifying for large fixed-rate mortgages, but are able to qualify for variable-rate mortgages with a lower initial interest rate.

Having a fixed-rate mortgage doesn’t necessarily guarantee that your monthly payments will never change. If your lender requires you to escrow your property tax and homeowner’s insurance, your monthly payment could increase if either of those amounts do. Of course, this isn’t a change in your actual mortgage payment amount, but it impacts your budget just the same.