What are the types of fixed rate mortgages?
Most lenders offer several types of mortgages; the most common are the fixed-rate mortgages for 30 years or 15 years. 30-year fixed rate This mortgage is an industry standard, as total payments are spread over so many years that your monthly payments are lower than they would be on a shorter-term loan. The interest rate, which is set, or locked in, at the time of obtaining the mortgage, remains the same throughout the life of the loan. On a 30-year loan, you end up paying thousands of dollars more in interest compared with a shorter-term obligation, but this interest is 100-percent tax deductible, which reduces your after-tax cost. 15-year fixed rate This mortgage also is becoming a common loan because borrowers pay a lower interest rate in exchange for larger monthly payments. Note, however, that a smaller portion of your monthly payment goes for interest and therefore the tax deduction is smaller.
