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
A mortgage in which the interest rate and monthly payments of principal and interest remain the same for the life of the loan.
- 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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