Traditional (or Conventional) Fixed Rate Loans

As the name implies, the interest rate is fixed for the life of the loan. Most of these are for a term of 30 years. Which means they are paid in full after 360 payments (12 months x 30 years). In this type of loan, monthly payments are fixed. The advantage is predictability. Once set, this loan doesn’t have any surprises.

Additonal Details:

While the total monthly payment is constant, the portion of each month’s payment applied toward interest does vary, as does the portion applied against the principal loan balance. Ask your lender for an amortization table which will list out exactly what the interest and principle portions are for each payment over the life of the loan. For those of you who want to calculate your own numbers, our traditional mortgage calculator will also give you an amortization table.

There are 15 and 20 year fixed rate options, too. If you are inclined to go with one of these, our advice is to consider taking out a 30-year loan, but voluntarily increase each month’s payment to the higher 15 or 20-year payback rate. That way if you encounter a rough financial stretch down the road, you can revert back to the lower 30-year payment until financial conditions improve and the higher payments can be resumed.

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