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A fixed-rate mortgage is a long-term loan that you use to finance a real estate purchase, typically a home.
Your borrowing costs and monthly payments remain the same for the term of the loan, no matter what happens to market interest rates.
This predetermined expense is one of a fixed-rate loan's most attractive features, since you always know exactly what your mortgage will cost you.
If interest rates rise, a fixed-rate mortgage works in your favor. But if market rates drop, you have to refinance to get a lower rate and reduce your mortgage costs.
Typical terms for a fixed-rate mortage are 15, 20, or 30 years, though you may be able to arrange a different length. With a hybrid mortgage, which begins as a fixed-rate loan and converts to an adjustable rate, the fixed-term portion is often seven or ten years.
- Browse Related Terms: Adjustable-Rate Mortgage (ARM), balloon mortgage, Ceiling, Co-maker, Fixed Rate Loan, fixed-rate mortgage, Home Equity Loan, Hybrid mortgage, Interest-only mortgage, Loan note, Negative amortization, Payoff, Payoff statement, Prepayment penalty, Principal balance, Refinancing, Rule of 78, Usury
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A mortgage in which the interest rate and monthly payments of principal and interest remain the same for the life of the loan.
State of Maine, Department of Professional and Financial Regulation - Cite This Source - This Definition- Browse Related Terms: Adjustable Rate Loans, Buy Down, CAP, Commitment, Credit Life & Disability Insurance, fixed-rate mortgage, Hazard Insurance/Homeowners Insurance, index, Margin, Prepayment Penalty (Mortgages), Principal, Interest, Taxes and Insurance (PITI), Variable-Rate Loans
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