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A fixed rate mortgage is one where the interest
rate does not change for the length of the loan. The
loan is amortized over the length of the term and
the per month mortgage payment is fixed. The term for this fixed rate mortgage loan is 30 years i.e the mortgage and interest has to be paid back in 30
years. The mortgage payment per month remains same all
throughout the life of the loan. The difference between
this and the 15 year fixed rate mortgage (in addition to
the difference in the number of years) is that the per
month mortgage for 30 year fixed is less than the per
month mortgage for 15 year fixed for the same mortgage
amount. Lenders typically offer the 15 year fixed at a
somewhat lower interest rate than the 30 year fixed.
This is the most common type of residential home
loan. The mortgage loan is repaid through fixed
monthly payments of principal and interest over a
set term. The borrowing rate stays the same over the
life of the residential mortgage loan. The term of
the home mortgage can be 10, 15, 20 or the popular
30 year fixed rate mortgage term. The way fixed
mortgage loans are structured, the mortgage interest
is front loaded. In the first years of the
residential loan, the bulk of the monthly payments
go to paying mortgage interest. It’s only later that
you will start significantly building equity in your
home as more of your mortgage payments go towards
paying down the mortgage loan principal. A fixed
rate mortgage is ideal for those who intend to stay
in their properties for a long time. |
