Lock your rate for 30 years and enjoy a low monthly payment.

Your loan balance is split into 360 monthly payments, and the interest rate stays the same for the life of your loan. Most of each payment goes toward interest at first, but over time, a bigger part goes toward paying off the principal. This is called amortization. Your principal and interest payment never changes because the rate is locked. This makes long-term budgeting easy to plan for.

The loan amount, the interest rate, and the 30-year (360-payment) term all affect how much you have to pay each month. A standard formula divides the total cost of borrowing by 360 payments so that each one is the same. Most lenders collect property taxes and homeowners insurance through an escrow account, which is added to your monthly bill on top of the principal and interest. If you put down less than 20% on a conventional loan, you will also have to pay for private mortgage insurance (PMI) until you reach 20% equity.

The total interest on a 30-year loan is usually more than the original amount borrowed, and sometimes it's a lot more, depending on the rate. That's the trade-off for having lower monthly payments and more cash flow options than shorter terms. Even small extra payments on the principal each month can lower the total interest by a lot and cut years off the loan without having to go through a formal refinance.

Most conventional, FHA, VA, and USDA loans don't charge prepayment penalties. This means you can pay extra or the full balance at any time without having to pay a fee. Most residential mortgages that were made after certain consumer-protection rules went into effect are not allowed to have prepayment penalties. One common strategy is to make payments every two weeks instead of once a month. This adds one extra full payment per year, which can cut the length of a 30-year term by four to five years.

The interest rate on a 30-year fixed-rate loan stays the same for the whole term, so your monthly payment never changes. An adjustable-rate mortgage (ARM) starts with a lower interest rate for a set amount of time, usually five, seven, or ten years. After that, the rate changes based on a market index, which means that your payment can go up or down. Fixed-rate loans are predictable, while adjustable-rate mortgages (ARMs) have lower initial payments but the risk that future changes will make the payment higher than a fixed-rate loan would have been.

Your principal and interest payments stay the same for the whole 30 years. That part is really fixed. But the amount you pay for property taxes and homeowners insurance can change from year to year, and since most lenders collect these through an escrow account that is included in your monthly payment, your total bill can change. Your lender will change the escrow part of your loan if your escrow analysis shows a shortfall or surplus. The payment on the mortgage itself does not change.

If your down payment is less than 20% of the home's purchase price, you need private mortgage insurance (PMI) on a conventional loan. It protects the lender, not you, in case you don't pay, and it makes your monthly payment higher. Your lender must automatically cancel PMI once your loan balance reaches 78% of the original home value. You can also ask for cancellation once your loan-to-value ratio reaches 80%. You can reach that point faster by making extra principal payments or having your home's appraised value go up.