Fixed-Rate Mortgage Finder

A fixed-rate mortgage (FRM) can give you peace of mind by protecting you from interest rate increases and providing you with consistent monthly payments. Predictable payments help with your personal budgeting, but make sure you weigh the benefits and drawbacks before signing on the dotted line.

What is a fixed-rate mortgage (FRM)?

A fixed-rate mortgage has an interest rate that stays the same for the life of the loan — keeping monthly payments consistent. FRMs are for borrowers who want the security of a fixed rate and those who plan to stay in their home for a while. Since the rate is locked in, changes in the market won’t affect your monthly payments.

How long do I repay a fixed-rate mortgage?

It depends on the term. If you have a 30-year fixed mortgage, for example, you would make payments for 30 years unless you sell the home or refinance. If you refinance to a shorter term — a 15-year fixed, for example — you would pay your mortgage for 15 years.

Fixed-rate mortgage examples

The most common FRM terms are for 15, 20 and 30 years, and they typically require a down payment of between 3% and 20%.

If you took out a loan of $400,000 at 6.5% interest over a 30-year period, for example, you would have standard monthly payments of about $2,530. Different rates and terms will affect your payments:

Home loan amount	Loan length	Interest rate	Monthly payment
$200,000	30-year	5%	$1,074
$300,000	30-year	5%	$1,610
$400,000	30-year	5%	$2,147
$200,000	15-year	4%	$1,479
$300,000	15-year	4%	$2,219
$400,000	15-year	4%	$2,959

How does a fixed-rate mortgage work?

Generally, the longer the term of the fixed-rate mortgage, the lower your monthly payments and the more interest you’ll pay over the life of the loan. On the other hand, the shorter the loan term, the lower your rate and the quicker you’ll build equity in your home. Though your monthly payments will be higher with a shorter term.

30-year fixed-rate mortgage

The 30-year fixed-rate mortgage is one of the most popular types of conventional fixed mortgages. Keep in mind that, although your monthly payments may be lower, you’ll pay more interest over the life of the loan.

While a 30-year fixed protects you from changing market conditions that may increase your payments, it also means you’re unable to take advantage of lower interest rates unless you refinance.

A 30-year fixed rate mortgage can be useful when:

• You intend to stay in the home for a long period of time
• You believe interest rates will increase
• You don’t expect your income to increase in the near future

20- or 15-year fixed-rate mortgage

Although your monthly payments is higher with a 15-year or 20-year fixed rate mortgage, you pay less interest with a shorter loan term. You can pay off your loan sooner.

While a 20- or 15-year fixed-rate mortgage provides you with consistent interest payments for the life of the loan, your monthly payment works out to be around 10% to 15% higher than a 30-year standard fixed mortgage.

A 20- or 15-year fixed-rate mortgage may be useful when:

• You plan to retire within 20 years or less
• You want to own your home quickly

How is the fixed-rate interest calculated?

Banks use several factors to set the interest rate for fixed-rate mortgage products. The United States Federal Reserve determines the requirements your lender follows when it sets the interest rate.

Banks also take into account the prime rate and the level of competition within the market. Banks consider economic factors such as inflation, the demand for money throughout the country and stock market levels.

Pros and cons of a fixed-rate mortgage (FRM)

Is a fixed-rate mortgage right for me?

Though it depends on several factors and your personal situation, FRMs may be the best fit when:

• Rates are low. If interest rates are low, it may be a good time to lock in a competitive rate.
• You plan to stay put. If you intend to live in your property for five years or more, the upfront charges may make it more cost-effective over a longer loan term.
• You have good credit. A lender looks at your credit score to measure your risk or repayment. If you have poor credit, you won’t qualify for the best rates.
• You value stability. FRMs is best suited for borrowers who are risk-averse and prefer to have stability, certainty and consistency of their monthly payments.
• You need to budget. By virtue of their fixed monthly payments, FRMs are predictable, which helps a borrower arrange their personal budget.

Bottom line

A fixed-rate mortgage can provide you with security and stability, but if you’re not entirely sure if it’s a fit for your financial situation, compare a few mortgage options before making a decision.

Frequently asked questions

• Can I get a fixed-rate mortgage that's shorter than 15 years?

  Yes. 10-year fixed-rate mortgages are an option, and some lenders offer even lower terms. Research the pros and cons of a shorter mortgage term to see if it’s right for you.

• Can I get a fixed-rate mortgage that's longer than 30 years?

  Yes. 50-year fixed-rate mortgages are available in some cases, but won’t be right for everyone. Research the pros and cons of a longer mortgage term to see if it’s right for you.

• Can I refinance a 30-year mortgage?

  Yes. If rates drop in your favor or if refinancing makes sense for other reasons, you can refinance into a shorter term or to take advantage of a better rate.