Simply put, every month you pay back a portion of the principal (the amount you’ve borrowed) plus the interest accrued for the month. Your lender will use an amortization formula
to create a payment schedule that breaks down each payment into paying off principal and interest. The length, or life, of your loan, also determines how much you’ll pay each month. Fully amortizing payment refers to a periodic loan payment where, if the borrower makes payments according to the loan's amortization schedule
, the loan is fully paid off by the end of its set term. If the loan is a fixed-rate loan, each fully amortizing
payment is an equal dollar amount. If the loan is an adjustable-rate loan, the fully amortizing payment changes as the interest rate on the loan changes.
Stretching out payments over more years (up to 30) will generally result in lower monthly payments. The longer you take to pay off your mortgage, the higher the overall purchase cost for your home will be because you’ll be paying interest for a longer period.
Conventional Fixed Rate Mortgages
A conventional loan provides opportunities for financing loan amounts that are within the conforming limits set by Fannie Mae and Freddie Mac. With a fixed-rate mortgage, you have predictability and peace of mind with the same principal and interest payments for the life of the loan because the interest rate never changes.
|10 Year Fixed
|15 Year Fixed
|20 Year Fixed
|30 Year Fixed