Fixed Rate Mortgage
Related Terms: Fixed Rate Home Loan, Fixed Rate Loan
A mortgage where the interest rate remains the same through the term of the loan and fully amortizes is known as a fixed rate mortgage. Since the interest rate remains constant, monthly payments don’t change. Fixed rate mortgages come with terms of 15 or 30 years.
![Fixed Rate Mortgage](https://97a71502eb772ee741d5-eec37cd46b952dd4b9d7b7ed972b68c1.ssl.cf1.rackcdn.com/fixed-rate.jpg)
Similar to an ARM, fixed rate mortgages come with pros and cons:
PROS:
PROS:
- Even if mortgage rates increase astronomically, your interest rate is locked in and your monthly payments won’t change.
- Knowing how much you need to put aside for your mortgage payments every month for the next 15/30 years is incredibly helpful when it comes to budgeting for the rest of your expenses.
- The fixed rates make it easier to shop around for loans, because you can simply calculate your monthly payments and make the best choice.
- Timing can be your worst enemy when it comes to locking in your fixed rate on a mortgage loan; you may feel you’re getting a low rate at closing time, but a few months down the line the rates may drop further and you feel trapped.
- If you do choose to refinance, you may end up paying thousands in order to do so, and may ultimately cost you more money.
- Fixed rate mortgages generally have higher interest rates than ARMs, and if you end up selling or refinancing in the first few years, your interest payments would have been greater.
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