A fixed-rate mortgage is a type of home loan in which the interest rate remains the same for the entire term of the loan. This means that the monthly payment for principal and interest will remain the same throughout the life of the loan, which is typically 15 or 30 years.
With a fixed-rate mortgage, the borrower knows exactly what their monthly payment will be, making it easier to budget and plan for the future. The interest rate on a fixed-rate mortgage is determined at the time the loan is originated and remains the same regardless of changes in market interest rates. This means that the borrower is protected from interest rate fluctuations that could result in higher monthly payments.
A fixed-rate mortgage can provide stability and predictability for homeowners who plan to stay in their home for a long time, or who prefer the peace of mind that comes with knowing their mortgage payment will not change. However, fixed-rate mortgages often have higher interest rates compared to adjustable-rate mortgages, which can result in higher monthly payments.
It’s important for borrowers to carefully consider their financial situation and future plans before choosing a fixed-rate mortgage or any other type of mortgage, and to shop around for the best rates and terms.