If you’re looking for a mortgage with payments that will remain essentially unchanged over its term, or if you plan to stay in your new home for a long time, a fixed-rate mortgage is probably right for you.
With a fixed-rate mortgage, the interest rate you pay and the monthly principal and interest payments are agreed upon from the outset and will not change throughout the term of the mortgage. In other words, the interest rate you close with won’t change—and your payments of principal and interest will remain the same each month—until the mortgage is paid off.
As you can see, the fixed-rate mortgage is an extremely stable choice. You are protected from rising interest rates. And it makes budgeting for the future very easy. But in certain types of economies, interest rates for a fixed-rate mortgage can be considerably higher than the initial interest rate of other mortgage options. That is the one disadvantage of a fixed-rate mortgage. Once your rate is set, it does not change and falling interest rates will not affect what you pay. However, you do have the option of refinancing if interest rates drop significantly.
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