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Fixed Rate Mortgages

A fixed rate mortgage is a mortgage with a fixed interest rate for the life of the mortgage. The biggest advantage of a fixed rate mortgage is that the cost is predictible for the life of the mortgage. This way, montly payments always remain the same. The tradeoff is that lenders demand a higher interest rate than if the mortgage were an adjustable rate mortgage. Usually, fixed rate mortgages are either 15 or 30 years. The advantage of a longer loan is a lower montly payment, by spreading out the loan over a longer period of time. The disadvantage is that the interest rates are higher and the borrower builds equity at a very slow pace, because the initial payments go largely toward interest rather than principal.