Fixed-Rate Mortgage
A home loan whose interest rate stays the same for the entire repayment period.
Fixed-rate loans give you a single interest rate for the life of the loan, which means your principal-and-interest payment never changes. The most common terms are 30 years and 15 years, with 20- and 25-year options available from many lenders.
Because the rate is locked, fixed loans cost more up front than the introductory rate on a comparable ARM, you're paying for certainty. Over a long holding period that certainty is usually worth it, especially in rising-rate environments.
Short-term fixed loans (15- and 20-year) carry lower rates than 30-year loans because the lender's exposure is shorter. The shorter the term, the higher the monthly payment, but the dramatically lower total interest paid often makes the math compelling for buyers with payment headroom.
Related terms
Other terms you'll see alongside Fixed-Rate Mortgage
A home loan whose interest rate is fixed for an initial period and then adjusts on a set schedule based on a market index.
The percentage of the loan balance the lender charges as the cost of borrowing, paid annually but accrued daily.
The portion of your mortgage payment that goes toward reducing the loan balance, separate from interest.
The schedule by which a loan balance is paid down over time through regular payments of principal and interest.
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