Fixed Rate Mortgages

The preferable option is what is called a fixed rate mortgage. These mortgages come with an initial interest rate that never changes. This allows families to effectively budget for their monthly housing expenses. With an adjustable rate it is impossible to know the exact amount of your mortgage payment going into the future. With a fixed rate there are no rude surprises or exposures to the vagaries of the market.

However, selecting a fixed rate loan does not force you to keep that initial rate forever. It will never be changed without your doing. It remains fixed so long as you choose, however if somewhere in the future interest rates decline it is always possible for you to refinance into a lower rate. So, with a fixed rate your rate can't increase, but it could potentially decrease. In ways it gives the best of both worlds.

There are many other differences between types of mortgages. Most have 30 year payment periods. Some newer mortgages have much longer periods. Some approach 50 years. These should be avoided. It is better to have a reasonable length loan where you can service a decent degree of principal. Some loans contain hidden fees and what are called "points". These should also be avoided if at all possible.