This "traditional" type of loan maintains its original interest rate throughout the entire life of the loan. (Any change in monthly loan payments will be due to increases in other charges like insurance or taxes that will naturally occur over time.) Fluctuations in market rates, over the term of your loan, won't have any impact on the amount of interest you pay because that rate is already "fixed." A fixed-rate mortgage loan may be a good choice if you:
- Want the security of knowing your interest rate will not change, nor will your monthly payment, unless property tax and insurance amounts change
- Plan to stay in this home for several years
- You don't expect your income to increase significantly in the coming years
Fixed rate mortgage loans come in various terms of 10, 15, 20, or 30 years. In determining the length of your loan, you may want to consider:
- Total amount of interest you want to pay over the course of your loan
- For example, the total cost of a 30-year loan in terms of the interest paid on the loan is higher than the total cost of a 10, 15, or 20-year loan. With a 30-year loan, you have the advantage of lower monthly payments due to the longer loan term.
- With a 15-year loan, you have the advantage of repaying the loan more quickly with higher monthly loan payments.
- Your ability to make a high monthly payment
- If you can afford to pay more per month, you reduce the number of months you have to pay. Also, choosing a 15-year term will save you thousands in interest charges vs. the typical 30-year term
Another option to decrease the amount of interest you pay is to get a 30-year loan, so you don't lock yourself into higher monthly payments, but pay a little "extra" each month towards the principal when you are able to do so.
Land
| Best Choice If:You want to own your land quickly. | Advantages:Allows financing for unimproved land. | Disadvantages:Can only finance up to 70% of value.
Requires a metes and bounds survey and perk test. |
30 Year Fixed
| Best Choice If:You want to qualify for a larger loan.
You plan on staying in the home for a long term. | Advantages:You will have a fixed rate over the life of the loan.
Level payments of principal and interest for the full term of the loan.
| Disadvantages:You end up paying more interest charges over the life of the loan. |
20 Year Fixed
| Best Choice If:You want to qualify for a larger loan.
You plan on staying in the home for a long term. | Advantages:You will have a fixed rate over the life of the loan
Level payments of principal and interest for the full term of the loan.
| Disadvantages:You end up paying more interest charges over the life of the loan. |
15 Year Fixed
| Best Choice If:You want to own your home more quickly.
You want to retire debt free.
You'll be retiring in less than 30 years.
You want to stay in your home once you retire. | Advantages:Cut mortgage length in half.
Save significant amount of money in interest payments.
| Disadvantages:Your monthly payment will be significantly higher than with a 30-year mortgage. |
10 Year Fixed
| Best Choice If:You want to own your home more quickly.
You want to retire debt free.
You will be retiring in less than 30 years.
You want to stay in your home once you retire. | Advantages:Cut mortgage length by as much as two thirds.
Save significant amount of money in interest payments. | Disadvantages:Your monthly payment will be significantly higher than with a 30-year mortgage. |
30 Year Fixed / 100% financing
| Best Choice If:You have limited funds for down payment and closing. | Advantages:No down payment.
Seller can contribute up to 3% of purchase price for closing cost help
Borrowers must have two months of reserves | Disadvantages:Higher rate.
Only available for primary residences. |
30 Year Fixed Jumbo/ 100% financing
| Best Choice If:You have limited funds for down payment and closing. | Advantages:No down payment.
Seller can contribute up to 3% of purchase price for closing cost help
Borrowers must have two months of reserves | Disadvantages:Higher rate.
Only available for primary residences and only available in some states |
30 Year VA Fixed
| Best Choice If:You have VA eligibilty and the property is in Maryland. | Advantages:Allows you to buy a property with no down payment. | Disadvantages:You must pay a VA Funding Fee. |
30 Year Fixed / Jumbo
| Best Choice If:You need to qualify for the largest loan possible.
You plan on staying in the home long-term.
You think interest rates will increase. You don't expect your income to increase significantly over the coming years. | Advantages:Fixed rate of interest.
Level principal and interest payments for the full term of the loan.
No risk that changing market conditions will increase your monthly payments.
| Disadvantages:You end up paying more in interest charges over the life of the loan.
Interest rates on Jumbo fixed rate loans are typically higher than conforming fixed rate loans. |
15 Year Fixed / Jumbo
| Best Choice If:You need to qualify for the largest loan possible.
You think interest rates will increase.
You don't expect your income to increase significantly over the coming years. | Advantages:Fixed rate of interest.
Level principal and interest payments for the full term of the loan.
No risk that changing market conditions will increase your monthly payments.
Cut mortgage length in half | Disadvantages:You end up paying more in interest charges over the life of the loan.
Note: Interest rates on Jumbo fixed rate loans are typically higher than conforming fixed rate loans. |
10 Year Fixed - Jumbo
| Best Choice If:You need to qualify for the largest loan possible.
You think interest rates will increase.
You want to own your home more quickly. | Advantages:Fixed rate of interest.
Level principal and interest payments for the full term of the loan.
No risk that changing market conditions will increase your monthly payments. | Disadvantages:Your monthly payment will be significantly higher than the 15- or 30- year loan. |
