Fixed Rate Loans are a common type of mortgage loan that sets the rate at the beginning of the loan so it won’t change it over time. They can be conventional loans, FHA, VA or Jumbo Loans.
Why would you want a mortgage with a fixed rate? The obvious answer is that it won’t rise over time, locking you into a fixed payment amount for the life of the loan. This may seem like a great option, and for most of the people who’ve bought in the past few years, that might be true, but rates also drop occasionally, and your fixed-rate mortgage might end up costing you more.
Despite this, the security of always knowing your monthly payment is comforting, and most conventional mortgages in the United States are fixed-rate loans. If interest rates drop significantly later on in the timeframe of the loan, the borrower may choose to refinance it at the lower rate at that time.
Along with a fixed rate, the borrower must select a term that balances their ability to afford the monthly payment with eliminating as much interest payment as possible from the loan.
A typical fixed-rate mortgage loan length is 30 years, but are offered in five-year increments between 10 and 30 years long.