Fixed rate mortgage (FRM) is a mortgage loan where the interest rate stays the same for the term of the loan, as opposed to home loans where mortgage rates may adjust. Fixed rate mortgages are distinguished by their interest rate; which includes compounding frequency, amount of, and term of the
home mortgage loan.
It is important to know these three values in order to calculate your monthly mortgage payment. Use the mortgage calculator to determine what your monthly mortgage payment will look like. There are several types of fixed rate mortgage loans:
|
Fixed Rate Mortgage |
What is It |
Benefits |
|
15 Year Fixed Rate Mortgage |
With a 15 year fixed rate mortgage, your interest rate is fixed for 15 years
Your monthly mortgage payment does not change
You pay the mortgage loan off in 15 years.
Common among homeowners refinancing from a 30-year fixed rate mortgage loan
|
Faster equity build up in your home than with the longer 30-year fixed rate mortgage loan
Lower your interest rate due to shorter loan term than a 30 year fixed rate mortgage
Your interest rate is fixed, doesn’t go up if interest rates increase
Your fixed monthly payment for the term of the 15 years |
|
30 Year Fixed Rate Mortgage |
With a 30 year fixed rate mortgage, your interest rate is fixed for 30 years
Your monthly mortgage payment does not change
You pay the mortgage loan off in 30 years.
Common choice among homebuyers looking for a lower interest rate and monthly payment |
Lower your monthly payments due to longer mortgage loan term than a 15 year fixed rate mortgage
Your interest rate is fixed, Doesn’t go up if interest rates increase
Your fixed monthly payment for the term of the 30 years |
|
Convertible fixed rate mortgage |
Convertible fixed rate mortgage gives you the ability to change the loan's interest rate after a certain time period or a specified movement in interest rates
Your fee can range from $100 to $300 per lender.
Also known as Reduction Option Loan (ROL) or the Reducing Interest Loan (RIL) |
You can adjust the interest rate on your fixed-rate mortgage loan without having to go through a refinancing
Lower fixed interest rates allow you to save money every month |
|
Balloon Payment mortgage |
You have a fixed rate for the term of the balloon mortgage, usually 5 to 7 years at the end of which the entire mortgage loan balance is due in one payment in full |
Lower interest rate due to shorter term of mortgage loan
Increased cash flow with lower monthly payments
Balloon payment mortgage is an option if you are planning on living in your home for a short period (5 – 7 years)
Option to refinance to a longer fixed-rate mortgage after the balloon mortgage loan term ends |
|
Biweekly Mortgages |
Shorter term of 18 to 19 years of your biweekly mortgage requires a mortgage payment bi-weekly or every two weeks.
There are 26 biweekly mortgage payments that ncrease the yearly amount paid by about 8 percent and in effect you pay 13 monthly payments yearly |
Lower your interest rate due to shorter loan term than a 30 year fixed rate mortgage
Further savings in your interest rate costs as your biweekly mortgage payment cuts into your principal faster than a 30 year fixed rate mortgage
Your ability to get a biweekly mortgage is based on a 30-year term |
|
Fixed-rate interest-only mortgage |
Slight variation of the traditional fixed-rate mortgage loan
You can lock in an interest rate for the life of the loan and pay only the interest on the loan for the initial 10 to 15 years
After the initial fixed interest only then the payments of principal and interest begins |
You can lower your monthly payment for the first few years
Allows you to save extra money and increase your cash flow during the first 10 to 15 years |