What is a Fixed-Rate Mortgage?
A fixed-rate mortgage is a home loan option with a specific interest rate for the entire term of the loan. With a fixed rate mortgage, the interest rate on the mortgage will not change over the lifetime of the loan. This means the borrower’s interest and principal payments will remain the same each month. The main advantage of a fixed-rate loan is that the borrower is protected from sudden and potentially significant increases in monthly mortgage payments if interest rates rise. Fixed-rate mortgages are easy to understand for most borrowers and vary little from lender to lender. The disadvantage of fixed-rate mortgages is that if interest rates fall, your mortgage rate won’t automatically fall along with it. Instead, if you want to take advantage of the lower rates, you would need to refinance, and refinancing may come with closing costs.