Fixed-rate mortgages are loans in which the interest rate and your mortgage monthly payments remain fixed for the entire period of the loan. This type of loan remains the most popular home financing method, currently accounting for about two-thirds of all residential mortgages. The main advantage of a fixed-rate loan is that you always know what your monthly principle and interest payment will be, so your basic housing cost will remain unaffected by interest rate changes until the mortgage is paid off. Fixed-rate mortgages are available for 30, 25, 20, 15, and 10 years. The 30-year fixed rate mortgage offers the lowest monthly payment plan, but you pay the most interest overall. The 15-year fixed rate mortgage, on the other hand, allows homeowners to own their homes in half the time and for less than half the total interest costs of the traditional 30-year loan, but there usually is a 10 to 15 percent higher monthly payment. You might also consider a bi-weekly fixed-rate mortgage, which shortens the loan term to 18 to 19 years by requiring a payment for half the monthly amount every two weeks. The shortened loan term can decrease your total interest costs substantially. However, remember that the lower your total interest costs, the fewer mortgage interest deductions you'll be allowed on your federal income tax. It's recommended that before you choose a fixed-rate plan, you assess your financial situation and needs carefully. Generally, the most ideal time to acquire fixed-rate mortgages is when interest rates are relatively low. Doing so will allow you to secure an affordable fixed interest rate for the life of your loan.
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