Fixed-rate mortgages are the most common mortgage for many homebuyers because the monthly payments are stable. The interest rate you lock-in will be the same interest rate you pay for the life of the loan - whether it's a 15-year, 20-year, 30-year or 40-year mortgage.
What are the benefits of a fixed-rate mortgage?
There are additional considerations to be aware of with fixed-rate mortgages:
Interest Only Fixed-Rate Mortgages
If you choose an interest-only option for a fixed-rate mortgage, the term of the loan is divided into two periods. During the first period, your monthly payment is lower because you pay only interest and no principal. In the second period, you pay both. For example, on a 30-year fixed rate mortgage, you might make interest-only payments for the first 15 years, and then pay both principal and interest for the remaining 15 years.
Interest-only loans can free up cash for other purposes during the initial period of the loan, but when you begin paying both principal and interest your monthly payments will be larger.
As with all interest-only mortgages, interest-only fixed-rate mortgages are not for all borrowers, and should be offered appropriately only to borrowers who clearly understand and qualify for the potential payment increases.