Fixed Rate Mortgages

The traditional fixed rate mortgage is the most common type of loan program, where monthly principal and interest payments never change during the life of the loan. Fixed rate mortgages are available in terms ranging from 10 to 30 years and can be paid off at any time without penalty. This type of mortgage is structured, or "amortized" so that it will be completely paid off by the end of the loan term. 

Even though you have a fixed rate mortgage, your monthly payment may vary if you have an "escrow account". In addition to the monthly principal and interest, many borrowers choose to have their taxes and insurance collected as a part of their mortgage payment(required if you put less than 20% down). This monthly amount equals 1/12th of the annual property tax and homeowners insurance costs and is put into an escrow account by the lender who uses it to pay these bills when they are due. If either the property tax or the insurance happens to change, the borrower's monthly payment will be adjusted accordingly. However, the overall payments in a fixed rate mortgage are very stable and predictable.

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