Fixed Rate Mortgage Loans

Fixed rate home mortgage loans are ideal for applicants who are risk averse and or plan to own their home indefinitely. A fixed rate mortgage carries a constant rate throughout the loan term, resulting in a principal and interest payment that will never change. Terms are typically available in five year increments ranging from 10 to 30 years, with shorter terms having a lower fixed rate. While the 30 year is the most popular fixed rate term it also carries the highest interest rate. That said, it carries the lowest required monthly payment as well and, in turn, the greatest level of payment flexibility.

The greatest benefit of a fixed rate home mortgage loan is the absence of interest rate risk, since the rate will not change at any time during the loan term. If market rates rise during the loan term a fixed rate home mortgage loan won’t be affected. The main disadvantage is that if market rates decline during the loan term, then the loan must be refinanced in order for the mortgage holder to benefit from the decline in interest rates.

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