A fixed-rate mortgage is a mortgage product that has a set interest rate for the life of the loan. Most financial institutions like Skyla offer 15-&-30-year fixed-rate mortgages.
The biggest advantage of a fixed-rate mortgage is that it provides stability and peace of mind for the borrower. They know exactly how much their mortgage payments will be every month, which can make budgeting easier. Additionally, fixed rates are typically lower than rates on adjustable-rate mortgages, making them a more affordable option for many homebuyers. However, one downside to a fixed-rate mortgage is that if interest rates fall, the borrower will not be able to take advantage of the lower rates.
Pros
- They’re easy to budget for since the rate is fixed and won't change for the entire life of the loan.
- There’s protection for a future rate increase.
- The loan payment stays the same (only insurance or escrow increases.)
- No repayment penalties if you pay off the loan early.
Cons
- Depending on your credit score and you may not get a favorable interest rate.
- You could pay higher closing costs.
- If you need to sell your home before the loan is paid off, you may end up owing more than the house is worth.
Who is this ideal for? Fixed-rate mortgages are best suited for borrowers who plan on staying in their homes for a long period of time and who are comfortable with taking on some risk.
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