Description of Massachusetts Fixed Rate Mortgages
Massachusetts fixed rate mortgages are the most common type of home loans preferred by consumers. A fixed rate mortgage by definition has a fixed interest rate and a fixed monthly mortgage payment which does not change over the life of the loan. Massachusetts fixed rate home loans feature terms in increments of 10, 15, 20, 25, 30 and 40 years.
Monthly mortgage payments for Massachusetts fixed rate mortgages are defined by an amortization schedule. While the monthly mortgage payment does not change for a fixed rate loan, the amortization schedule specifies the portion of that payment that is attributable to interest versus principal which does change with time.
In the early years, the majority of the mortgage payment goes towards interest for long-term fixed rate mortgages (20, 25, 30 and 40 year terms) whereas very little goes towards principal. Short-term Massachusetts fixed rate mortgages (10 and 15 year terms) on the other hand build equity much faster since most of the mortgage payment goes towards principal rather than interest.
For a hypothetical 30-year fixed rate loan at 5.000%, it would take approximately 16 years before more of the mortgage payment goes towards principal than interest and slightly longer than 20 years to reduce the principal balance in half!
Learn more about the different types of Massachusetts fixed rate mortgages and their associated amortization schedules including a Massachusetts 10 year fixed mortgage, Massachusetts 15 year fixed mortgage, Massachusetts 20 year fixed mortgage, Massachusetts 25 year fixed mortgage, Massachusetts 30 year fixed mortgage or Massachusetts 40 year fixed mortgage.
Advantages of Massachusetts Fixed Rate Mortgages
- Interest rate never changes
- Stable monthly mortgage payment which stays constant (principal and interest)
- Amortization of long-term Massachusetts fixed rate loans results in lower, more affordable monthly payments
- Long-term fixed rate loans are tax advantaged in early years because most of the mortgage payment is interest which can be deducted by most homeowners
Disadvantages of Massachusetts Fixed Rate Mortgages
- Higher interest rate and monthly mortgage payment than adjustable rate mortgages
- Long-term fixed rate loans build equity at a very slow pace because mortgage payments go primarily towards interest at the beginning, not principal
Borrowers Best Suited for Massachusetts Fixed Rate Mortgages
- Conservative risk tolerance
- Intend to live in home for long period of time (7+ years)
Borrowers Least Suited for Massachusetts Fixed Rate Mortgages
- Aggressive risk tolerance
- Intend to live in their home for only a few years (7 years or less)
