Cherith Edwards

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There are many types of home loans, although fixed-rate mortgages remain the most popular option for homebuyers. Most fixed loans have a 15-year to 30-year term. Also known as conventional loans, fixed-rate mortgages have been around longer than any other loan option.

You may choose a fixed-rate mortgage if:

You want the security of a mortgage payment that never changes
Mortgage rates are currently low

Each mortgage payment will be equal to your interest rate times the principal on your loan, plus a percentage of principal. At the beginning of your mortgage, most of your mortgage payments will go toward interest, while most payments will go toward principal toward the end.

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15-Year or 30-Year Fixed-Rate Mortgage?

You will need to choose between a 15-year and a 30-year fixed-rate mortgage, each with advantages and drawbacks.

A 30-year mortgage allows you to borrow money for the long term without risking higher interest rates or changing payments. Your payments will be lower than a 15-year mortgage, and your interest payments will be higher, so you can deduct more interest on your taxes. You will build equity slower than with a shorter-term loan, however, and you will pay more in interest. The interest rate will also be higher.

A 15-year loan will allow you to build equity faster with a lower interest rate and less in interest charges. The monthly mortgage payment will be higher, however.

Is a Fixed-Rate Mortgage the Right Choice?

While mortgage rates remain at historic lows, it typically makes sense to choose a fixed mortgage. Fixed-rate mortgages are usually the better deal when rates are low, even if you only stay in your home for a short time. This is especially true if you want the security of the same payment and interest rate, and you are willing to pay more in interest.

You can use a mortgage calculator to compare the costs of a fixed versus an adjustable-rate mortgage to decide which makes more sense for you.