Chapter 1
Federal Mortgage Laws and Consumer Protection Regulations
Course: Safe Mlo Prep
Subject: Safe Mlo Prep
Chapter: General Mortgage Knowledge
OVERVIEW
Fixed-rate mortgages are the most common and straightforward loan product in the residential mortgage market. The interest rate and monthly principal and interest payment remain constant for the entire loan term — providing complete payment predictability for the borrower.
- How Fixed-Rate Mortgages Work
- The interest rate is set at origination and never changes
- The monthly principal and interest payment is identical from the first payment to the last
- Early payments are heavily weighted toward interest — later payments apply more to principal reduction
- This is called a fully amortising loan — the balance reaches zero at the scheduled final payment
- Common Fixed-Rate Loan Terms
- 30-year fixed: Most common — lower monthly payment but higher total interest paid over life of loan
- 20-year fixed: Middle ground — lower total interest than 30-year, higher payment
- 15-year fixed: Higher monthly payment but significantly less total interest — builds equity faster
- 10-year fixed: Highest payment of standard terms — least total interest paid