What is a Fixed Rate Mortgage
A type of Home Loan with a Fixed Interest Rate for the entire term of the Loan is known as a Fixed Rate Mortgage. Though Interest rates in the market fluctuate constantly, if you choose a Fixed Rate Mortgage, you are locked in to that rate for the entire term of the Loan. The monthly Principal and Interest Rate Payment of the borrower on a fixed Rate Mortgage remain the same for the entire term. There are certain Advantages and disadvantages of a Fixed Rate Mortgage.
The disadvantage of a Fixed Rate Mortgage is that typically an Adjustable Rate Mortgage or an Interest Only Loan may have a lower Interest rate than a fixed Rate Mortgage. Secondly, if the Interest rates drop in the future, borrowers on a Fixed Rate Mortgage would be at a financial loss.
The Advantage of a Fixed Rate Mortgage is that if the Interest Rates go up, the borrower is not affected by a sudden rise of Interest Rates in the market. Fixed Rate Mortgages are very simple and straight forward and easy to understand by the borrower.
Related Topics: What is an Adjustable Rate Mortgage? What is an Interest Only Loan? How is the interest rate calculated on FHA loan? Explain interest rate calculation scenarios. What is "High interest rates"? Explain Factors when determining interest rates Explain "Interest rate adjustment calculation scenarios"