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    • What is a fixed-rate mortgage?

      A fixed-rate mortgage has an interest rate that remains the same for the life of the loan. In other words, your total monthly payment of principal and interest will remain the same over time. (Note: Your mortgage payments can fluctuate, though, if your property taxes or homeowners insurance rates fluctuate.) A fixed-rate mortgage is the most popular type of financing because it offers predictability and stability for your budget.

      Fixed-rate mortgages tend to have a higher interest rate than an adjustable-rate mortgage, or ARM. But ARMs have low, fixed rates for a brief period, typically three, five or seven years, before the interest rate resets. After that time, rates can go up or down (as can your monthly payments) for the remainder of the loan term, though most ARMs have a cap. 

    • How long do I repay a fixed-rate mortgage?

      The mortgage term is the number of years you repay the loan. Fixed-rate mortgages usually come in terms of 15 or 30 years. Here are some pros and cons of each term:

         30-year

             Pros:

                   •    For any given loan amount, the monthly payments are lower than a shorter-term mortgage.

             Cons:

                  •   You pay more total interest over the life of the loan compared with a shorter term.

                  •   The interest rate is higher.

       

      Many borrowers prefer a 30-year, fixed-rate mortgage over a 15-year loan because the monthly payment is lower for the same loan amount. Choosing a longer fixed term means you can borrow more money, too. It can also free up your monthly cash flow for other financial goals, such as saving for emergencies, retirement or your child’s college tuition.

         15-year

              Pros:

                  •   You pay less total interest over the life of the loan.

                  •   The interest rate is lower.

             Cons:

                  •   For a given loan amount, the monthly payments are higher.

    • Many borrowers prefer a 30-year, fixed-rate mortgage over a 15-year loan because the monthly payment is lower for the same loan amount. Choosing a longer fixed term means you can borrow more money, too. It can also free up your monthly cash flow for other financial goals, such as saving for emergencies, retirement or your child’s college tuition.

       

      Source: Bankrate.com