What Is a Fixed-Rate Mortgage?

A fixed-rate mortgage is the most straightforward and popular home financing product in the United States. The defining feature is simple: the interest rate is permanently locked for the entire duration of the loan—whether that is 10, 15, 20, or 30 years. Your principal and interest (P&I) payment never changes from the first payment to the last, providing a level of financial predictability that adjustable-rate mortgages (ARMs) cannot match.

This calculator computes your exact monthly payment, generates a full amortization schedule, and shows how much of your total payment goes toward building equity versus paying interest to the bank—an essential insight for making an informed mortgage decision.

The 15-Year vs. 30-Year Decision

The choice between a 15-year and 30-year fixed mortgage is one of the most consequential financial decisions a homeowner makes. On a $320,000 loan at 6.5% APR, a 30-year term produces a monthly P&I payment of $2,023. The same loan on a 15-year term costs $2,790 per month—$767 more per month. However, the 30-year borrower will pay approximately $408,000 in total interest over the loan life, while the 15-year borrower pays only $182,000. The shorter term saves an extraordinary $226,000 in interest, though it requires a significantly higher monthly commitment.

Understanding Amortization

Every fixed-rate mortgage payment is split between two components that shift over time. In the early years, the vast majority of each payment is consumed by interest, because the outstanding balance is at its peak. For example, on a $320,000 loan at 6.5%, your very first payment includes approximately $1,733 of interest and only $290 of principal. By year 20, those proportions flip—more goes to principal than interest. This is amortization in action.

The True Monthly Cost of Homeownership

Your P&I payment is only part of your total monthly housing cost. Lenders typically require that property taxes and homeowners insurance be collected monthly into an escrow account, from which they pay these bills on your behalf. If your down payment is below 20%, PMI is also added. Our Advanced Options panel lets you input annual property tax and insurance amounts to calculate your true all-in monthly payment—the number that must fit within your household budget.

Down Payment Impact

The down payment is a powerful lever. Every extra dollar you put down reduces your loan principal by exactly one dollar, reducing interest charges over the entire loan term. Additionally, reaching a 20% down payment eliminates the requirement for Private Mortgage Insurance (PMI), which typically adds 0.2%–2% of the loan amount per year to your costs. On a $400,000 home, the difference between 5% down ($20,000) and 20% down ($80,000) eliminates PMI and reduces the loan by $60,000—saving over $100,000 in total long-term costs.