Loan types
Fixed-rate mortgage
A mortgage whose interest rate — and therefore principal-and-interest payment — never changes for the life of the loan, most commonly over a 30- or 15-year term.
What does fixed-rate mortgage mean?
The fixed-rate mortgage is what roughly four out of five Michigan buyers choose, because the payment certainty is worth a lot: your principal and interest are locked for the whole term regardless of what the market does.
A 30-year fixed keeps the payment affordable; a 15-year fixed prices lower and cuts lifetime interest by more than half but raises the monthly payment.
The trade-off versus an adjustable-rate loan is that you pay a bit more up front for that stability — insurance against rising rates.
A Michigan example
On a $285,000 loan, a 30-year fixed spreads the principal thin for an affordable payment, while a 15-year fixed roughly doubles the principal in each payment. The 15-year costs far more monthly but retires the loan in half the time.
Common questions
Is a fixed rate better than an ARM?
For buyers who'll stay put, usually yes — it removes the risk of rising rates. An ARM only wins if you're confident you'll sell or refinance before its rate resets.
Related terms