What is a fixed-rate mortgage?
This is the most popular type of mortgage which has a fixed rate of interest and monthly payments. Fixed rate mortgage is offered for two periods - 15 years and 30 years. The popularity of a fixed-rate mortgage stems from the fact that borrowers do not like to repay their loans at a fluctuating rate of interest. Besides, with a fixed-rate mortgage, you can get a great deal if you apply for the mortgage when the rates are low. To get an idea of mortgage rates in the US, go to this mortgage calculator.
The advantages of a 30-year mortgage include having a lot of time to repay, low monthly payments, more money in hand for other expenses, and greater tax deductions. The disadvantages include a higher interest rate as compared to a 15-year mortgage, in the initial phase; the money goes into paying for the interest charged and not the principal.
With a 15-year mortgage, the biggest advantage is that you build equity at double the speed and reduced overall interest rates. Disadvantages include high monthly payments, reduced tax deductions, and often buyers are restricted to purchasing a smaller home.
