How a Fixed Rate Mortgage Works

How a Fixed Rate Mortgage Works

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

Monthly Mortgage Payment for a $380,000 Fixed Rate Mortgage

10 Years$3,604
15 Years$2,570
20 Years$2,155
25 Years$1,902
30 Years$1,760
40 Years$1,618

Mortgage Term

Use our free mortgage quote form to review fixed rate mortgage proposals from leading lenders.  Comparing lenders and loan quotes is the best way to save money on your mortgage.  Our quote feature is easy-to-use and no obligation.

  • Total Interest Expense For a Fixed Rate Mortgage
  • The amount of total interest expense you pay over the life of the mortgage is directly related to the length of the mortgage.  The longer the mortgage term, the more you pay in total interest expense.  So even though a mortgage with a shorter term has a higher monthly payment than a mortgage with a longer term, you end up paying much less in total interest expense with a mortgage that has a shorter term.

    The chart below compares the monthly mortgage payment and total interest expense over the life of the mortgage for $400,000 fixed rate mortgages with a 4.00% mortgage rate and 10, 15, 20, 25, 30 and 40 year terms.  As demonstrated by the chart, the shorter the mortgage term, the higher the monthly payment but the lower the total interest expense over the life of the loan.  Selecting a shorter mortgage term can save you tens of thousands and even hundreds of thousands of dollars in interest expense over your mortgage. That means less money for the lender and more money for you.

  • Total Interest Expense Comparison

    Total Interest ExpenseMonthly Mortgage Payment
    $4,05010 Years$85,977
    $2,95915 Years$132,575
    $2,42420 Years$181,741
    $2,11125 Years$233,405
    $1,91030 Years$287,478
    $1,67240 Years$402,440

    Mortgage Term

  • One creative way to think about mortgage term is to get a loan with a longer term but make the same payment that you would with a shorter term mortgage, so a higher mortgage payment than what is required.  For example, you get a 30 year mortgage but make the same, higher payment that you would with a 15 year loan.  That way you maintain the flexibility of having a lower required monthly payment that goes along with a longer mortgage term (in case you cannot afford to make the higher payment at some point in the future), but you pay off your mortgage faster and potentially save a significant amount of money in lower interest expense.

    Watch our video tutorial below to understand how a fixed rate mortgage works

  • FREEandCLEAR Mortgage Instructional Video

    Fixed Rate Mortgage Overview Instructional Video

    Related FREEandCLEAR Resources

  • Sources

    "Fixed-rate Mortgages."  My Home by Freddie Mac.  Freddie Mac, 2019.  Web.

    About the author

    Michael Jensen, Mortgage and Finance Guru

    Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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