Predictable payments
Fixed rate fully amortizing loans have two distinct features. First, the interest rate remains fixed for the life of the loan. Secondly, the payments remain level for the life of the loan and are structured to repay the loan at the end of the loan term.*
During the early amortization period, a large percentage of the monthly payment is used for paying the interest. As the loan is paid down, more of the monthly payment is applied to the principle.
Protection against rising interest rates
A fixed-rate mortgage offers several notable benefits to homeowners. One of the primary advantages is the predictability it brings to monthly housing costs. With a fixed interest rate, borrowers can confidently plan their budgets, as their principal and interest payments remain constant throughout the life of the loan, regardless of fluctuations in the broader interest rate market. This stability provides peace of mind and shields homeowners from sudden payment increases that adjustable-rate mortgages may experience. Additionally, fixed-rate mortgages are an excellent choice during periods of low-interest rates, as they allow borrowers to lock in a favorable rate for the long term, potentially saving them substantial amounts of money over the life of their loan. Overall, the security and financial planning benefits of a fixed-rate mortgage make it a popular and sensible choice for many homebuyers.
*Payment amounts are subject to taxes and insurance changes.
