Fixed Rate Mortgages

Fixed rate mortgage terms range from 10 to 30 years and can be paid off at any time without penalty. This type of mortgage is structured, or “amortized,” to be completely paid off by the end of the loan term. There are also “bi-weekly” mortgages, which shorten the loan term 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.)

Even with a fixed rate mortgage, your monthly payments may vary if you have an “impound account”. In addition to the monthly loan payment, some lenders collect money every month (from buyers who put less than 20% down when purchasing their home) for the prorated monthly cost of property taxes and homeowners insurance. The extra money is put in an impound account by the lender, who uses it to pay the borrowers’ property taxes and homeowners insurance premiums when they are due. If either the property tax or the insurance rates change, the borrower’s monthly payment will be adjusted accordingly. However, the overall payments in a fixed rate mortgage are very stable and predictable.