Fixed-rate mortgages: What you need to know and the best lender options

When it comes to taking out a mortgage, many people prefer that their rate and their payments stay the same over the life of the loan.

A fixed-rate mortgage allows you to do just that. It is a home loan with a rate that remains consistent over the financing term. It is set when the papers are signed on closing day.

Forty percent of U.S. households have a mortgage, of which 92% are fixed-rate, according to the Federal Reserve Bank of St. Louis. Fixed-rate mortgage terms vary based on lenders but generally span from five to 30 years.

Like all mortgage rates, average fixed rates move in tandem with the 10-Year Treasury Yield, which varies based on the state of the economy. Other factors that determine a borrower’s fixed-rate include the individual’s credit, the type of loan they are seeking and the lender they choose.In most cases, you can only change your rate by refinancing.

Lenders traditionally offer fixed-rate options for all of the common types of mortgages, including conventional mortgages, FHA loans, VA loans, USDA loans and jumbo loans.

If you want to see how 30-year fixed rates and 15-year fixed rates are trending, CNBC Select reports on Freddie Mac’s Primary Mortgage Market Survey each week, which provides a snapshot of the weekly numbers. This is howthe 30-year fixed rate and the 15-year fixed rate have fluctuated over the past five years:

Fixed-rate vs. adjustable-rate mortgages

Another option is an adjustable-rate mortgage.

This is when a mortgage has a fixed rate for a set period, and then the rate adjusts at steady increments thereafter—usually every six months or every year.

Adjustable-rate mortgages typically have an initial rate that is slightly lower thana fixed-rate. But adjustable rates are unpredictable: When the rate adjusts, your monthly payment could change dramatically, making this type of mortgage a risky option for most households.

While fixed rates tend to be higher, they offer consistency — and you can budget for the life of the loan rather than a few years.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every personal finance article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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