Fixed Rate Mortgages (FRMs) have a set or “fixed” interest rate that does not change during the life of the loan. Because the rate does not go up or down, the combined principal and interest (P&I) payment is consistent for the life of the loan. For borrowers who want a stable payment and expect to remain in their home for at least 3-5 years, a fixed rate loan may be the best option.
Fixed rate loans generally have a loan term or length of 10, 15, 20, 30 or even 40 years. A loan with a shorter term will usually have a lower interest rate, but the payment will be higher since the loan amount is paid back over a shorter period of time. If you think you may want to pay off your loan earlier, but don’t want to commit to a higher monthly payment, consider a 20 or 30 year loan term; you can always pay extra principle, to pay off the loan faster.