If you are planning on staying in your home for more than 5-10 years and want the security of a monthly mortgage payment that will never change, a fixed rate mortgage may be for you. Of course, your property taxes and homeowner insurance may increase over time, but your principal and interest payments will stay the same.
Fixed rate mortgages are available for 30 years, 20 years and 15 years but the most common fixed rate loans are 15 and 30 year mortgages.
There are two types of conventional (conforming) loans. Loan amounts less than or equal to $424,100 are considered standard conforming. Loan amounts greater than $424,100 and less than or equal to $612,950 are considered “High Balance” conforming conventional. Your rates will be higher if your loan falls into the “High Balance” range.
Conventional loans typically require higher credit scores (620 or more) and if a home buyer is unable to put at least a 20% down payment, the loan will include private mortgage insurance (read our article on what PMI is). Well qualified homebuyers can put as little as 3% down for standard conforming loans and 5% down for High Balance loans.
30 year fixed
- Lowest monthly payment of the fixed rate loan choices.
- Keeps home loan payments affordable by extending them over a longer period of time.
- Provides maximum tax-deductible interest (consult your tax advisor).
15 year fixed
- Has a lower interest rate than a 20 or 30 year loan but a higher monthly payment.
- Allows you to pay off your home faster and build equity quicker.
- Saves considerable money on total interest paid over the life of the loan.
5/1, 7/1, 10/1 Hybrid Adjustable Rate Mortgages
Based on your circumstances (and the market) you may be interested in a Hybrid Adjustable Rate 30 Year loan.
- Rates are fixed for 5,7 or 10 years and then convert to adjustable mortgages for the remaining term.
- During the fixed period, rates can be lower than rates on 30 year fixed conventional loans offered at application.
- After the fixed period, rates adjust yearly based on a predetermined index plus margin.
- The rate can never go lower or higher than a predetermined amount.