What Is a Fixed Rate Mortgage?

The most common type of mortgage that new Sacramento homeowners take out is a fixed rate mortgage. If you are shopping for a new home and talking to lenders, chances are you have gone over the options for a fixed rate loan. Here is what you need to know to decide if a fixed rate mortgage is the right Sacramento loan option for you.

The Interest Rate is Fixed

The “fixed” part of the fixed rate mortgage applies to the interest rate. When you borrow money to purchase a home, your lender will charge you interest at a certain rate. Rates can vary by lender but must also follow guidelines set by the Federal Reserve. Other factors that will impact your rate include your credit, the length of the loan, the type of the loan, and the purchase price and down payment.

With a fixed rate loan, that interest rate will not change over the life of the loan. This means that over the 15 or 30 years that you pay off the loan, the interest rate will remain the same and your monthly payments will not change based on the interest rate. Keep in mind that they may change due to taxes.

The Interest Rate is Okay

You can usually find a lower interest rate with an adjustable rate mortgage, ARM, given the same other factors (credit, down payment, etc.). Some people prefer this lower monthly payment and opt for an ARM. Keep in mind that the interest rate may go up down the road, making your monthly payments higher.

The interest rate for an ARM can change over the life of the loan, however. Many homeowners prefer to have a consistent monthly payment and unchanging interest rate that they can count on as they pay off their home. If you plan to be in your home for a long time, the certainty that comes with a fixed rate mortgage can be a better option than the temporary lower interest rate of an ARM.

About the Author

Kevin Oto

Mortgage Broker/ President at Green Haven Capital Inc. · NMLS #62641

With over 20 years of experience, Kevin has established himself as one of Northern California’s most trusted mortgage advisors — helping homebuyers, homeowners, and real estate investors secure financing with clarity, confidence, and competitive pricing in any market.

Specializes in: Conventional loans, Purchase loans, Investment property financing

Licensed in: CA, CO, MD, OR, TN, TX, UT

→ Contact → (916) 476-6507 → Verify NMLS license