Fixed Rate Mortgages
The most common type of mortgage program where your monthly
payments for interest and principal never change. Property
taxes and homeowners insurance may increase, but generally
your monthly payments will be very stable.
Fixed-rate mortgages are available for 30 years, 20 years,
15 years and even 10 years. There are also "bi-weekly"
mortgages, which shorten the loan by calling for half the
monthly payment every two weeks. (Since there are 52 weeks
in a year, you make 26 payments, or 13 "months" worth, every
year.)
Fixed rate fully amortizing loans have two distinct
features. First, the interest rate remains fixed for the
life of the loan. Secondly, the payments remain level for
the life of the loan and are structured to repay the loan at
the end of the loan term. The most common fixed rate loans
are 15 year and 30 year mortgages.
During the early amortization period, a large percentage of
the monthly payment is used for paying the interest . As the
loan is paid down, more of the monthly payment is applied to
principal . A typical 30 year fixed rate mortgage takes 22.5
years of level payments to pay half of the original loan
amount.
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