A fixed-rate mortgage has an interest rate that remains the same for the life of the loan. In other words, your total monthly payment of principal and interest will remain the same over time. This is a very popular option with fixed income borrowers that want one consistent payment and never want to worry about market cycles or mortgage rate corrections (Note: Your mortgage payments can fluctuate, though, if your property taxes or homeowner’s insurance rates fluctuate).
Fixed-rate mortgages tend to have a higher interest rate than an adjustable-rate mortgage, or ARM. But ARMs have low, fixed rates for a brief period, typically three, five, seven years, or ten-year terms before the interest rate resets. After that time, rates can go up or down (as can your monthly payments) for the remainder of the loan term, though most ARMs have a cap.
A fixed-rate mortgage is the most popular type of financing because it offers predictability and stability for your budget. It’s definitely the more conservative approach to mortgage financing. You never have to worry about your payment having to adjust based on your interest rate. You know exactly what your monthly payment will be (Principal and Interest) each and every month.
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