Fixed Rate Mortgages (FRM)

The monthly payments for fixed rate mortgages (FRMs) never change. The stability this brings makes a fixed rate mortgage the first choice for the majority of home buyers.

The amount of time you have to repay the loan ir called the term and lenders offer many terms for their fixed rate mortgage programs. Depending on your lender, the terms available for a fixed rate mortgage are 10, 15, 20, 30, or even 40 to 50 years.

The most popular of these loan terms are the 15 and 30 year mortgages. 50 and 40 year mortgage terms are uncommon and are meant for housing markets with inflated prices and monthly payments too high for most families to afford.

Risk Factors

Because the interest rate never changes for the borrower, the lender assumes more risk. This is why fixed rate mortgages have higher rates than adjustable rate mortgages in which the borrower assumes the risk interest rates may change. If you have an aversion to risk, consider a fixed rate mortgage over an adjustable rate.

Rates are fixed but payments can change

Even with a fixed rate mortgage, some home buyers can see changes in their monthly payments. This isn't due to necessarily lender shenanigans. Your monthly payments often include insurance and property taxes. One or both of these can, and usually do, increase over the years. If you see a spike in your monthly payment, don't be afraid to ask question but don't be surprised if your payment increase is legitiment.

Prepayment

Many home buyers desire like to repay their loans as quickly as possible and want to make additional payments in order to reduce the interest paid during the term of the loan. If you think you may want to repay your loan early, make sure your fixed rate mortgage does not include a prepayment penalty. On the other hand, if you know yourself well enough to know you'd never make an extra payment, ask your lender if they'll lower your rates if you accept a prepayment penalty.