What is a fixed-rate mortgage?
A fixed-rate mortgage is a home loan with an interest rate that stays the same throughout the life of the loan. Fixed-rate mortgages are among the most common types of home loans, and you can choose from conventional options or government-backed programs like FHA, VA, and USDA loans.
5 Benefits of a LendComet fixed-rate mortgage
Making a monthly fixed-rate mortgage payment offers several advantages. Most importantly, it locks in your interest rate for the life of the loan and provides both long- and short-term options. Additional benefits include:
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Predictability: Your monthly payments remain the same, so you always know what you owe.
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Lower payments: Long-term fixed-rate mortgages can offer lower monthly payments.
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Tax savings: The interest paid on your loan may be tax-deductible.
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Down payment assistance: Many programs allow the use of down payment assistance.
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0% down options: Some programs offer up to 100% financing.
Can your mortgage payment go up on a fixed-rate loan?
No. Even if overall market rates rise, your principal and interest payments on a fixed-rate mortgage remain the same for the life of the loan.
How a fixed-rate mortgage works
A fixed-rate mortgage locks in your interest rate for the entire loan term. Each monthly payment includes both principal and interest. The principal reduces your loan balance, building equity in your home, while the interest is the cost of borrowing. Typically, early in the loan term, a larger portion of your payment goes toward interest rather than principal. Over time, this gradually shifts, with more of your payment going toward principal. Understanding this helps you choose the fixed-rate mortgage that best fits your needs.
30-year fixed-rate mortgage
A 30-year fixed-rate mortgage is a long-term option that offers some of the lowest monthly payments since they’re spread out over a longer period. However, making more payments means you’ll pay more interest over time. This mortgage is a good choice if you plan to stay in your home for seven to ten years or longer. Even if your timeline is shorter, the lower monthly payments can still make it a smart option, though you’ll build equity more slowly.
15-year fixed-rate mortgage
A 15-year fixed-rate mortgage is a short-term loan. Monthly payments are typically higher since the loan isn’t spread out as long, but you’ll pay significantly less in interest over the life of the loan, saving thousands. Additionally, a larger portion of each payment goes toward principal earlier, helping you build home equity faster. Overall, it’s a more cost-effective way to borrow.
Can you refinance a fixed-rate mortgage?
If you qualify, refinancing a fixed-rate mortgage can help you achieve several financial goals, such as shortening your loan term, lowering your interest rate, or eliminating mortgage insurance. Before refinancing, it’s important to determine whether the timing and your budget make sense. A refinance calculator can help you see how much of a difference refinancing could make for your mortgage.