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Fixed Rate Mortgages

With a fixed rate mortgage, payments toward both the interest and principal remain constant over the life of the loan. As a result, monthly loan payments stay the same. Taxes, however, may change according to local or state tax laws.

Advantages of fixed rate mortgages:

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The interest rate stays the same – it doesn’t go up even if rates in the market do.
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Monthly payments of principal and interest don’t change.
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They may be a good choice for buyers who plan to own their new homes for a long time.

Disadvantages of fixed rate mortgages:

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They may cost more than other loan types – the interest rate is often higher than rates for adjustable rate mortgages.
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A long-term loan may not be suitable for a homebuyer planning to sell or refinance a new home within five to seven years.

Types of Fixed Rate Mortgages

Fixed rate mortgages traditionally have 15-year or 30-year amortization terms. PHH Mortgage offers these options, as well as loans with 20-year and 25-year terms.

A 30-year fixed rate mortgage offers consistent monthly payments for the entire 30 years you have the mortgage. So if the market is good, you can benefit from locking in a lower rate for the full term of the loan. This is the best choice if you’re looking for a long-term, stable loan — for instance, if you’re planning on staying in your house for some time.

A 25-year fixed rate mortgage offers consistent monthly payments for the entire 25 years you have the mortgage. So if the market is good, you can benefit from locking in a lower rate for the full term of the loan. This product option may be a good choice if you’re looking for a long-term, stable loan and want to build equity more quickly than with a 30-year loan.

A 20-year fixed rate mortgage allows you to make a consistent monthly payment throughout the 20 years you have the mortgage. The shorter term means you pay the loan off more quickly, and therefore pay less interest. And you'll build equity faster than you would with a 30-year loan. (But remember, the shorter term means higher payments when compared to the 30-year fixed rate mortgage.)

A 15-year fixed rate mortgage means consistent monthly payments for all 15 years you have the mortgage. By building equity even more quickly than with a 30-year or 20-year loan, and paying less interest, you'll save money in the long run. It's an ideal option if you can handle the higher payments and if you'd like to have the loan paid off in a shorter period of time – for instance, if you plan to retire.

Which term will work best for you?

A short-term loan:

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May work well for a homebuyer planning to own a home for a shorter length of time
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Enables a homebuyer to pay off the loan more quickly
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Generates less interest, and therefore lower overall costs, over the life of the loan
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Translates into higher monthly payments
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Builds equity more quickly

A long-term loan:

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May be good for a homebuyer planning to own a home for a longer time period
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Results in the loan being paid off more slowly
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Generates more interest, and therefore higher overall costs, over the life of the loan
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Translates into lower monthly payments
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Builds equity more slowly

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