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.