What is a fixed-rate mortgage, and should you get one?

  • de

A fixed-rate mortgage locks in your rate until you’ve completely paid off your mortgage.

Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective. Terms apply to offers listed on this page. Read our editorial standards.

A fixed-rate mortgage locks in your rate for the duration of your loan.
Most lenders will offer you a 30-year, 20-year, or 15-year fixed-rate mortgage.
Fixed-rate mortgages are better deals than adjustable-rate mortgages right now.
Policygenius can help you compare homeowners insurance policies to find the right coverage for you, at the right price »
Table of Contents: Masthead Sticky

When you buy a home, you’ll choose between two basic types of mortgages: an adjustable-rate mortgage (ARM) and a fixed-rate mortgage.

An ARM locks in your rate for the first few years or so, then periodically changes over time – typically once per year.

A fixed-rate mortgage locks in your rate for the duration of your loan. Although US mortgage rates will increase or decrease over the years, you’ll still pay the same interest rate in 30 years as you did on your very first mortgage payment.

30-year vs. 15-year fixed rates

A 30-year mortgage is the most common term length for a fixed-rate loan, but most lenders let you choose between a 30-year, 20-year, and 15-year fixed-rate mortgage. Some lenders offer other term length options, too.

The longer your term is, the lower your monthly payments will be, because you spread the loan out over a long period of time.

Shorter terms do come with their benefits, though. Lenders charge lower interest rates for shorter terms, and you’ll be making monthly payments for a shorter amount of time – these factors combined mean you could end up paying tens of thousands of dollars less over the life of your loan if you choose a 15-year or 20-year mortgage over a 30-year loan.

A fixed-rate mortgage may lock in your interest rate, but you still have options. You can make more than your minimum payment every month to knock out the loan more quickly, or you can refinance for a lower rate or shorter term.

Or you may just decide to stick with your original mortgage and let things play out. Do whatever is best for your financial situation.

Fixed-rate mortgage pros and cons


If mortgage rates increase, you get to keep your lower rate. US mortgage interest rates fluctuate along with the state of the economy, but you don’t have to sweat it if rates increase at any point during the life of your loan.You can lock in a historically low mortgage rate. Overall, rates are at all-time lows right now. If your finances are in a good place, you can get a super low rate without ever risking a rate increase later.Predictable payments can make it easier to plan a budget. Granted, certain payments that are wrapped up in your mortgage could change over the life of your loan, such as private mortgage insurance or property taxes. But your interest rate will stay the same from year to year, which could make it easier for you to plan out your monthly expenses overall.


If mortgage rates decrease, you keep your higher rate. Although this is a factor to consider, fixed rates are at historic lows at the moment. You probably don’t have to worry about missing out on a significantly lower rate.Adjustable rates may start lower. Right now, some ARM rates are lower than fixed rates. An ARM may be better if you plan to move before the intro-rate period ends so you don’t risk your rate increasing later.Related Content Module: More Mortgage Coverage

Read the original article on Business Insider

Faci un comentariu sau dai un răspuns?

Adresa ta de email nu va fi publicată. Câmpurile obligatorii sunt marcate cu *