Interest Rate

Fixed-Rate Mortgage

A fixed-rate mortgage is a home loan with an interest rate that remains the same for the entire term of the loan. This means your monthly principal and interest payment stays constant, providing predictability and protection against rising interest rates. Fixed-rate mortgages are available in various terms, with 15-year and 30-year being the most common. They are the most popular mortgage type in the United States because of the payment stability they offer.

Amortization

Amortization is the process of paying off a mortgage through regular monthly payments over a set period of time. Each payment is split between principal, which reduces the loan balance, and interest, which is the cost of borrowing. In the early years of a mortgage, a larger portion of each payment goes toward interest, with the balance gradually shifting toward principal over time. A 30-year amortization schedule, for example, spreads repayment across 360 monthly payments.

Refinance

Refinancing is the process of replacing your existing mortgage with a new one, typically to obtain a lower interest rate, change your loan term, or access home equity. A rate-and-term refinance adjusts your rate or repayment period, while a cash-out refinance lets you borrow against your equity and receive the difference in cash. Refinancing involves closing costs similar to your original mortgage, so it is important to calculate your break-even point to determine if it makes financial sense.