Types of Mortgages - The Fixed-Rate Mortgage

by Brandon Cornett

A fixed-rate mortgage offers an interest rate that will never change over the life of the loan. The primary benefit is that if interest rates increase during the term of your loan, your rates stay the same.

On the other hand, if interest rates drop during the term of your loan, your rates still stay the same (unless you refinance your home at the lower rate). This is the biggest difference between this loan and variable / adjustable loans (see next item).

The length (or "term") of a fixed-rate mortgage can be 15, 20 or 30 years. Each of these terms has its pluses and minuses:

• 30-year fixed rate - The 30-year term gives you maximum tax advantage by having the greatest interest deduction. It's also worth noting that the 30-year fixed-rate loan is often the easiest type of loan to qualify for.


• 20-year fixed rate - If you shorten your mortgage, you usually get a lower interest rate. The 20-year mortgage is not as common as the 30-year, so you'll have to shop around to go this route.


• 15-year fixed rate - Same benefits as the 20-year term (quicker payoff, lower rates), but will increase the monthly amount you pay.

Learn more about fixed rate mortgages